Per FNMA DU requirements, disputed accounts may not be ignored and we must ensure all DU conditions related to the disputed accounts are satisfied. DU disputed account conditions require that we verify the accuracy of the disputed tradeline(s) by determining if the tradeline belongs to the borrower and by confirming the accuracy of the payment history. To satisfy these conditions, we must use one of the following options:
| 1. | If the trade line does not belong to the borrower, or the reported payment history is inaccurate, the U/W must obtain written documentation and include it in the loan file submitted for purchase. Under these circumstances, when the information is validated, DU may require no further action. A provable paper trail (cancelled checks, bank statements, etc.) must be used to remove items from payment history when they are in dispute. Borrower, Accountant, Employer, etc. LOE’s will not satisfy the requirement. |
| a. | Additionally, if the borrower is disputing a liability listed on the credit report, but has NOT done so with the credit agencies, it may not be removed from DTI simply because they provide us the proof. We need the proof AND the notation on the credit report that the item is in dispute. |
| 2. | If the tradeline does belong to the borrower, and the reported payment history is accurate, the disputed tradeline(s) must be considered in the risk assessment (DTI). To ensure the disputed tradeline is considered, the U/W must obtain a new credit report with the tradeline no longer reported as disputed and resubmit the loan casefile to DU. |
| a. | Why do we need a new credit report? |
| i. | Per FNMA guidelines (B3-5.1-02), if there are multiple disputed tradelines or a dispute on a mortgage tradeline, the lender should obtain correspondence directly from the borrower indicating the reason for the dispute. The aspect of the tradeline—such as balance, payment history, etc.—that is being disputed is of particular concern when considering the impact to the borrower’s overall credit profile. THEREFORE, since we do not allow a manual underwrite, a new credit report with the “dispute” notation on the account(s) removed is the only option. |