One miniscule computer glitch stood in the way of borrowers getting approved for a loan. Fannie Mae’s underwriting software failed to find the distinction between a foreclosure and a short sale. Per MoneyWatch:
Here's how borrowers were getting stuck: If you want a mortgage, you sit down with a lender. The lender takes down your information and inputs it into a computer that has access to your credit report and other financial information. If the lender wants Fannie Mae to insure the loan, it will use Fannie Mae's underwriting software, called Desktop Underwriter.
Meanwhile, borrowers were told to wait longer due to an error somewhere in the system.
Desktop Underwriter wasn't built with that kind of workaround. Instead, if a borrower reported he had been through a short sale while the system said it was a foreclosure, the system would not allow the lender to continue the application without shifting to a manual underwrite. With the system fix that will roll out Nov. 16, lenders can note the discrepancy and add additional documentation to prove the system's information is wrong and allow the application to continue, Sen. Bill Nelson, a Florida Democrat who began investigating the issue in May, said.
