Fannie is putting mortgage lenders in a Catch-22 with its "loan quality initiative," which takes effect June 1.

One of the new requirements is that lenders have to check any undisclosed liabilities a borrower has taken on between the initial loan application and the closing.

In order to check a borrower's debt-to-income ratios, a lender typically would have to pull a second credit report.

Fannie has only recommended that lenders pull a second report. "It is not a requirement," said Fannie spokeswoman Janis Smith.

Teresa Grove, a senior vice president at Kroll Factual Data in Loveland, Colo., said lenders "are between the proverbial rock and a hard spot."

"Fannie Mae does not require a credit report, but the fact is that there is no better source for detecting undisclosed liabilities," she said.

When pressed, Brian Faith, a Fannie spokesman, said the GSE did not want to mandate any specific method and that there are other "processes" a lender may choose to fulfill the requirement. "In all likelihood, in the overwhelming majority of instances, pulling the credit report a second time in some manner will be the method used," said Faith.


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