Fannie Mae Selling Guide B3-2-07 — Refer with Caution Recommendations

Fannie Mae Selling Guide B3-2-07 — Refer with Caution Recommendations

Effective 2023-02-01 · publisher's stamp for this provision

B3-2-07, Refer with Caution Recommendations (02/01/2023) Introduction This topic contains information on Refer with Caution recommendations, including: Overview of Refer with Caution Recommendations Lender Response to a Refer with Caution Recommendation Overview of Refer with Caution Recommendations The layering and degree of risk factors that result in a Refer with Caution recommendation represent a greater risk of serious delinquency than for those loan casefiles that receive an Approve recommendation. Any loan casefile that receives a Refer with Caution recommendation from DU does not represent a level of risk that is acceptable to Fannie Mae for DU loans. If the data DU considered was an accurate representation of the borrower’s income, assets, liabilities, and credit profile, the loan is not eligible for sale to Fannie Mae as a DU loan. The following table provides further information about this DU recommendation. Refer with Caution Eligible for Fannie Mae’s limited waiver of certain mortgage eligibility and underwriting representations and warranties? No Satisfies Fannie Mae’s credit risk standards/assessment? No, the loan does not meet Fannie Mae's credit risk standards for DU loans. Satisfies Fannie Mae’s mortgage eligibility criteria? No, the loan does not meet Fannie Mae's stated eligibility requirements for DU loans. Eligible for sale to Fannie Mae? Not as a DU loan. The lender may manually underwrite the loan in accordance with this Selling Guide if the loan product or transaction otherwise allows for sale of manually underwritten loans. See B3-1-01, Comprehensive Risk Assessment and the Eligibility Matrix for appropriate eligibility requirements and considerations. Lender Response to a Refer with Caution Recommendation When a loan casefile receives a Refer with Caution recommendation, the lender should: Review the DU loan data for accuracy and verify that all income, assets, and liabilities were accurately recorded and fully disclosed by the borrower. Determine if there is any information outside of the data submitted to DU that could have affected DU's recommendation. Update the loan application data (if applicable) and resubmit the loan casefile to DU for an updated recommendation. Review the credit report data to determine if the information accurately represents the applicant’s credit history. Erroneous data in the credit report, or contradicting or derogatory information, could have affected DU’s recommendation. (See B3-2-01, General Information on DU, for additional guidance.) Investigate whether there were any extenuating circumstances that contributed to serious instances of derogatory credit. If the loan casefile still receives a Refer with Caution recommendation, the lender may manually underwrite the loan in accordance with the requirements in the table above.

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