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Equityfax focuses on unreported debts
Today, Equifax Inc. announces the introduction of a groundbreaking mortgagesolution to help creditors meet Fannie Mae's revised guideline on borrowers' debt. Andisclosed Debt Monitoring(TM) is the first mortgages sector technology that monitors and informs banks of new account and borrowing activities launched during the "quiet period" - a historic dead zone for creditors.
This latest Equifax application enables creditors to implement Fannie Mae's policies while providing greater visibility into the underwriting processes to detect unreported debts and minimise buy-back risks. Part of the Fannie Mae Loan Quality Initiative, mortgages must comply with collateral policies to make sure that the lender has the willingness and ability to pay back a loan.
Fannie Mae will request creditors to check that they have not entered into any new borrowings or commitments at the time of pre-financing for loans requested on or after June 1, 2010, which could impair their capacity to meet a repayment covenant. In the event that extra funds have been raised by the time of financing, a debtor must be re-qualified with the one-month instalment contained in the debt-to-income computation.
Debt or liability arising during this timeframe that is not included in the debtor' s financial statements or that is not included in the definitive debtor' s financial statements or that is not included in the definitive debtor' s financial statements may expose the creditor to the risks of repurchasing the debt. "This new debt monitoring instrument will be very useful in helping us ensure that we continue to provide the best possible loans while fully adhering to Fannie Mae's loan quality initiative program," said Michael Lyon, vice president of operations for Quicken Loans, the nation's biggest on-line retailer of loans.
"It will give us the much needed overview of all the changes that affect a customer's credit history throughout the credit lifecycle. This will also enable us to make sure that we can help our customers make smart financial choices if they make changes after the first underwriting. "A " Always on " option continually supervises the monitoring for new indebtedness or obligations arising to the Mortgagor during the calm time from the date of applying for the Mortgages to the date of the conclusion of the Loans.
Undisclosed Debt monitoring alert creditors through the surveillance lifecycle about borrowers' activities that may pose a possible exposure to mortgages in their pipeline. Fast alerting of borrowers' activities in a sensitive timeframe allows creditors to use the right underwriting assets to minimize possible misrepresentations or frauds by the borrowers, while concentrating on approval of high-quality loans in a high-volume area.
This need for a remedy is underlined by the effects of this multi-billion euro issue on the mortgages markets. Equifax analysts say up to $142 million in car loans were potentially missed last year during the mortgaging proces. A further tendency, the incorrect presentation of incomes, jobs, occupancy or wealth by the borrowers when requesting a new home credit, resulted in an increase in the incidence of bad loans and substantial loss in 2009.
Equifax recognized this pressure in the business and worked with several clients, devoting a lot of effort and resource to developing this industry-leading business solutions. "With Fannie Mae's needs and the increasing challenges of unrevealed debts, banks are looking for new and cutting-edge instruments to smartly minimize their underwriting risk," said Dann Adams, chairman of Equifax Consumer Information Solutions.
"Equifax has implemented the Debt Monitoring Plattform to provide creditors with a strong tool to solve this key problem in the mortgages insurance business. Unless there is more openness about the credit business detail, many creditors run the danger of groping in the dark. What is more, they are in danger of being caught in the middle. "This Equifax software enables banks to improve controls at different stages of the process.
As well as alerting users every day, the trading system provides benchmarks and analyses of various borrowers' activities that are monitored during the surveillance proces. A further benefit is that the software will help creditors better prioritise their underwriting review by allowing them to concentrate their efforts on candidates and deals that represent the highest buyback risks.
After the end of the surveillance timeframe, the creditor will receive a synopsis with supplementary information that can be used to minimise the risks of a further credit repurchase.