One reason that refi is taking so long

Did a disputed bill put the kibosh on your refi? Possibly, according to Ken Harney's column at latimes.com.

Could a little-known and potentially controversial practice by mortgage giants Fannie Mae and Freddie Mac kill or stall your next loan application? Absolutely.

Picture this scenario: You've got outstanding credit scores close to 800 and solid equity in your home. All you want is to refinance your mortgage to take advantage of today's rock-bottom interest rates.

Your application should rocket through your lender's system and get you a great rate. But your bank says: Sorry, we can't do your loan. Fannie Mae's automated underwriting system won't accept any application where there is a notation in the credit report that a consumer has disputed an account or "tradeline."

You explain that the dispute -- over a medical bill or a credit card charge -- was valid. The account was closed. The creditor promised to remove the dispute notation but apparently didn't. Your loan officer won't budge. Policy is policy, he says. Your refi application is dead.

Apparently automated underwriting is kicking some refi applications out and returns them to the lender for manual underwriting. This may be why some people have been reporting such long delays in getting their refinancing. Has this happened to you?

--Lauren Beale

Thoughts? Comments?

 

Comments

[Ace]

If there is a mistake on your credit report, you should get it fixed before applying for a mortgage. You get 3 free credit reports a year. How hard is it to spend 5 minutes a couple of times a year and check your report?

Whether it is a new purchase or a refinance, applying for a mortgage isn't something you do on a whim. Stupid article.

[Tip And Ring]

I refied a loan with Citimortgage. The initial loan sailed through with very little paperwork. The refi was with a significantly lower rate and converting to 15 year fixed.

Even though I had never been late with a payment and had been paying additional principal every month I got a virtual colonoscopy from all the paperwork they demanded.

At one point they threatened to cancel the whole process if I didn't respond within three days of the send date of the demand. They sent it by US Mail and it took seven days to arrive.

Never again unless interest rates drop into the threes.