Announcement 2025-047 Pre-fund Diligence and Best Practices – Undisclosed Debt (Conforming Loans)
Newrez LLC (Newrez) Approved Correspondent Clients: Newrez is reminding all Correspondent Clients of requirements and best practices to assist in identifying undisclosed liabilities up through the day of closing (note date). For complete underwriting guidelines, refer to Newrez Underwriting Guide Chapter 1F.6 Inquiries and Undisclosed Liabilities.
All Correspondent Clients are responsible for determining that all debts of the borrower incurred up through the day of closing of the subject mortgage have been disclosed and considered in the underwriting of the loan.
To help identify potential undisclosed debt, a single repository Soft Credit Pull, or a third-party Undisclosed Debt Monitoring (UDM) Report is required for Non-Delegated transactions and strongly recommended for Delegated transactions. Regardless of the process used to identify undisclosed debt, both Non-Delegated and Delegated Clients remain responsible for ensuring all debts incurred up through the day of closing of the subject mortgage have been considered.
Clarification on requirements: What’s not required on the Soft Credit Report:
- Should not include updated monthly payment amounts and updated outstanding balances for all existing tradeline(s) shown on the original credit report.
- Should not include any credit score(s).
- Should not include updated payment histories for all existing tradeline(s) shown on the original credit report.
Recent trends have shown that when the Soft Credit Pull contains more information than is required, it could render the loan ineligible due to the loss of the AUS approve/accept recommendation or an unacceptable DTI. For example:
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The Soft Credit Pull includes updated monthly payments and updated outstanding balances for existing tradeline(s) shown on the original credit report. |
The new monthly payments must be considered, and DU/LPA rerun if outside of tolerance. |
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The Soft Credit Pull includes a credit score(s) for any of the borrowers. |
A new tri-merged credit report for all borrower(s) must be obtained and DU/LPA rerun. |
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The Soft Credit Pull includes updated payment histories for existing tradeline(s) shown on the original credit report. |
If any new derogatory credit is revealed, a new tri-merged credit report for all borrower(s) must be obtained and DU/LPA rerun. |
Clarification on requirements: What Is Required on the Soft Credit Report OR Undisclosed Debt Monitoring report
A single repository Soft Credit Pull or a third-party Undisclosed Debt Monitoring (UDM) Report for the purpose of determining if any new debt not shown on the original credit report has been incurred by the borrower(s) is required.
- The Soft Credit Pull or UDM report should be obtained as close as possible to closing but no earlier than 10 calendar days prior to the Note date.
- If any new credit inquiries appear on the Soft Credit Pull or UDM report, those inquiries must be addressed by the borrower(s).
- Any new debt appearing on the Soft Credit Pull, UDM report or resulting from an inquiry must be considered in the DTI and DU/LPA rerun if tolerances have been exceeded.
Correspondent Clients are encouraged to review with their credit vendor what information is currently being provided when ordering a Soft Credit Pull compared to what information is required.
Newrez reminds all Correspondent Clients of the required reps and warrants for individual loans as outlined in the Correspondent Operations Guide Section C102 (53) which in part includes the following:
- Correspondent Clients are required to determine that all debts of the borrower incurred or closed, up to and concurrent with the closing of the subject mortgage are disclosed on the final loan application and included in the qualification for the subject mortgage loan. If it is determined that any debts were not adequately disclosed on the application nor included in the debt-to-income ratio such that the loan would not have met eligibility requirements, the mortgage loan will be ineligible.
Correspondent Clients must have adequate internal controls and processes in place to ensure these requirements have been met.