Another Bug in the Loan Process

Interest rates are great right now, and that's good news for home buyers, but lenders are making it harder for borrowers with less than perfect credit to qualify.
Now there's a new "bug" in the loan process.
Some consumers with exceptional credit reports and high FICO scores are being denied mortgages by Fannie Mae’s automated underwriting system because there is a notation in the credit report that the consumer has disputed an item.
Under the Fair Credit Reporting Act, consumers can dispute inaccurate information on any account in their credit files, but once a consumer disputes an item, a notation to this effect is made in the file. Until the notation is removed, most credit-scoring systems won't factor the disputed item into the consumer’s score.
However, with the recent surge in companies claiming to “clean up” blemishes on consumers’ credit reports, some lenders are finding that these credit companies are disputing accurate, but negative items, hoping the consumer will qualify for a loan before the dispute is resolved.
Applications that are denied through Fannie Mae’s automated underwriting system are sent back to the lender for manual underwriting. It is then up to the lender to determine and document whether this information is accurate and underwrite the borrower’s credit accordingly.