Mortgages Analyzed
Mortgages Analyzed
Mortgages Analyzed
 
Credit Report Inquiries Letter

What is a Credit Report Inquiries Letter?

Credit Report Inquiries Letter

Credit Report Inquiries Letter is a letter where the borrower provides description for the recent credit inquiries appearing on the credit report. Credit Report Inquiries Letter is a type of a letter of explanation. The lender requires this letter when it wants to know the reasons why there were recent credit report inquiries and if the borrower has taken any loan that is not yet reported on the credit report.

Causes of Recent Inquiries on Credit Report

A number of recent inquiries on the credit report may be due to following reasons:

  1. Shopping for a Mortgage Loan: Borrowers generally shop with various lenders when they are looking to obtain a mortgage loan. Each lender obtains a credit report which is reported on the credit report as an inquiry. A subsequent lender reviewing the credit report of the borrower may see that a number of inquiries have been made. If these inquiries were the result of the borrower's efforts to shop around for a mortgage loan then these inquiries do not affect the loan approval.
  2. Obtaining a Recent Loan: It takes some time for a lender to report the new account information to the credit bureau which causes a delay between when a borrower takes a loan and when it starts appearing on the credit report. During this period, the only thing that may show on the credit report is the inquiry. A subsequent lender wants to make sure that the borrower has not taken any additional loans that have not yet been reported on the credit report. Any additional loan needs to be considered by the underwriter in making the credit decision. A bigger concern is where he borrower is trying to conceal the additional loan. Such unreported debt is not only material for purposes of credit decision but also has fraud implications. In fact, this is a common fraud scheme where a borrower obtains multiple loans on the same property within a short period of time without disclosing the debt to the other lenders.
Source :www.MortgagesAnalyzed.com

Lender's Considerations

Underwriting Process

If there are a number of recent credit inquiries on the credit report, the underwriter should put a condition on the loan requiring a Credit Report Inquiries Letter. The loan originator needs to talk to the borrower and obtain the reasons for such inquiries. If the reason for the inquiries is because the borrower was shopping for a mortgage loan and has not obtained any additional loans then the loan originator may provide a pre-filled Credit Report Inquiries Letter which the borrower can sign and return back to the loan originator.

If the borrower has obtained additional loans then the loan originator should obtain the details of additional loans in the Credit Report Inquiries Letter. Additional documentation should also be requested such as loan agreement and recent account statement.

The letter is obtained before all the conditions for loan approval can be removed and the loan documents are drawn. In other words, obtaining Credit Report Inquiries Letter would be a prior-to-docs condition.

Source :www.MortgagesAnalyzed.com
 

Document Summary

 
Credit Report Inquiries Letter
Purpose
To describe the reasons for recent credit inquiries appearing on the credit report.
Use in Mortgages
Used by lender to determine if the borrower has obtained a new debt that is not yet reported on the credit report.
Other Names
  • Credit Report Inquiries Letter
  • Credit Inquiry Letter
  • Credit Inquiries Letter
  • Letter of Explanation for Credit Inquiries
  • LOE – Credit Inquiries
Type
Letter
Provided By
Borrower. Lender may provide a pre-filled letter.
Provided To
Lender
Notarization Required
No
Signed By
Borrowers
Life Cycle Stage
Origination
Recordkeeping
Retain the document in the loan file as long as the loan is outstanding.
Model Form
None
Applicable Laws
None

Updated: Sep 02, 2013

Comments

comments powered by Disqus
Letter where the borrower provides description for the recent credit inquiries appearing on the credit report
Finance
Know all there is to know about the US Mortgage Industry. We help you to make a well informed decision.
Finance
Loan Products
Confused about the choosing right loan product for you? We help you decide the loan product that suits your needs best.
Loan Products
Documents
Here you will find all there is to know about the forms, papers & documents required for Home Loan Mortgage and much more.
Documents
Regulation
List of all the Regulations related to US Mortgage Industry.
Regulations