Equal Housing Lender
How to Make Change in Fannie Mae DO/DU When Past Short Sale Credit Shows Up As a Foreclosure
Contributors • September 30, 2020
Running into the credit issue where past short sale credit appears as a foreclosure and results in a Fannie Mae Refer Denial? Follow these steps to do the workaround in the Fannie Mae Desktop Automated system.
Do you still run into the issue where your borrower receives a DO/DU Refer/Caution when past short sale credit appears as a foreclosure in the Fannie Mae automated underwriting system (AUS)? Fannie Mae developed a workaround to correct this within their system. Retrieve this document: Fannie Mae Prior Derogatory Credit Event: Borrower Eligibility Fact Sheet and follow the steps in this video to input the correct information to change a Refer/Caution to an Approve/Eligible within the Fannie Mae DO or DU AUS if this is the only reason that is causing the loan denial.
Steps to follow within Fannie Mae DO/DU upon receiving Refer/Caution:
- Under Risk Eligibility, findings will state “Desktop Underwriter has identified the following pre-foreclosure sale on the credit report….” The account name and number producing this message will show up below the statement.
- Go to top of findings and click on LOAN INFORMATION.
- Go to the left column. Scroll down to Full 1003 and click.
- This opens to an expanded list. Click on Declarations.
- A new page, Edit Loan: Full 1003: Declarations opens. Make sure that NO is picked in row c. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years? Go to bottom of the right column and click on blue Explanation button.
- The Declarations Explanation page opens. On row c. insert Confirmed CR FC Incorrect. Click on OK and resubmit.
IMPORTANT:
- Short sale must be 4 years + 1 day minimum for this to work in Fannie Mae.
- This will not work in Freddie Mac automated underwriting system as there is no workaround in Freddie Mac.
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