Loan Quality Monitoring™ (LQM)
Undisclosed Debt Detection – LQI Russian Roulette
Undisclosed debt is one of the leading causes of investor repurchase requests – Especially now since both GSE’s electronically validate 100 percent of loans purchased, performing reviews within 120 days. FNMA LQI and FMAC RLG require lenders to verify whether borrowers have incurred new debt or liabilities from the initial application through loan closing. For borrowers that have incurred new obligations beyond the 3% DTI tolerance, lenders are required to re-underwrite these loan applications to ensure eligibility.
"An Equifax study showed that almost 20 percent of borrowers applied for at least one new trade line during the quiet period. The average monthly payment on this new debt was $251.00"
The GSEs and "Refresh" Reports
Neither Fannie Mae nor Freddie Mac require lenders to re-pull credit prior to closing (as clarified in the August 2010 FNMA Selling Guide announcement "SEL-2010-11") Rather, Loan Quality Initiative guidelines call for "Lenders to have processes in place to facilitate borrower disclosure of changes in financial circumstances throughout the origination process. "
While many lenders utilize "refresh" reports immediately prior to close, this process discloses new debt or derogatory credit at the eleventh hour; posing great risk of delay in closing and reputational risk when an applicant no longer qualifies based upon new information.
Loan Quality Monitoring™- A Best Practice Solution
Credit Technologies’ Loan Quality Monitoring™ (LQM) suite of credit monitoring products affords you the peace of mind of knowing when changes in borrower credit profiles pose a risk to loan salability or performance. Borrower credit files are monitored 24/7, notifying you daily when an applicant experiences any of the following:
• New Inquires, including secondary use
• New Tradelines including collection accounts
• Significant changes in account balances/utilization
• New public records (Bankruptcies, Judgments, liens)
• New 30-60-90-120 day delinquencies
• Foreclosure or Notices of Default
Protection against Trigger Leads
Trigger lead abuses continue to cause significant difficulties for consumers and lenders. While most defensive methods such as the Opt-Out and Do-Not-Call processes provide little protection, Credit Technologies’ Loan Quality Monitoring system can help you identify potential trigger lead activity on your borrowers, allowing you to re-engage the borrower and mitigate any competitive concerns.
"The detection capabilities of credit Technologies’ LQM far exceed that of any single bureau solution. "
Our suite of credit monitoring products include the pioneering Undisclosed Debt Monitoring™ (UDM) powered by Equifax®, as well as solutions from Experian® and TransUnion® - All designed to help you minimize the risk of last-minute loan fallout and costly loan buybacks and penalties.
To activate Loan Quality Monitoring services on your account, please contact your Business Analyst or call 800.445.4922, Option 1.