B3-2-07, Refer with Caution Recommendations (02/01/2023)

The layering and degree of risk factors that result in a Refer with Caution recommendation represent a greater risk of serious delinquency than for those loan casefiles that receive an Approve recommendation.

Any loan casefile that receives a Refer with Caution recommendation from DU does not represent a level of risk that is acceptable to Fannie Mae for DU loans. If the data DU considered was an accurate representation of the borrower’s income, assets, liabilities, and credit profile, the loan is not eligible for sale to Fannie Mae as a DU loan.

The following table provides further information about this DU recommendation.

When a loan casefile receives a Refer with Caution recommendation, the lender should:

• Review the DU loan data for accuracy and verify that all income, assets, and liabilities were accurately recorded and fully disclosed by the borrower. 

• Determine if there is any information outside of the data submitted to DU that could have affected DU's recommendation.

• Update the loan application data (if applicable) and resubmit the loan casefile to DU for an updated recommendation.

• Review the credit report data to determine if the information accurately represents the applicant’s credit history. Erroneous data in the credit report, or contradicting or derogatory information, could have affected DU’s recommendation. (See  B3-2-01, General Information on DUB3-2-01, General Information on DU, for additional guidance.)

• Investigate whether there were any extenuating circumstances that contributed to serious instances of derogatory credit.

If the loan casefile still receives a Refer with Caution recommendation, the lender may manually underwrite the loan in accordance with the requirements in the table above.