A Letter of Explanation for Credit Inquiries For Mortgage is a crucial document in the U.S. mortgage application process, typically required when multiple credit inquiries appear on an applicant's credit report within the past 120 days. This document becomes necessary when underwriters need clarity about an applicant's recent credit-seeking activities to ensure they meet lending criteria and maintain stable creditworthiness. The letter must comply with federal regulations including the Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), and various mortgage lending guidelines. It serves as a formal explanation of credit inquiries, helping underwriters distinguish between rate shopping, necessary credit applications, and potentially concerning credit behavior. The document is particularly important in the current lending environment where credit scrutiny has increased following the 2008 financial crisis and subsequent regulatory reforms.
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1. Header with Contact Information: Include your full name, current address, phone number, email, date, and the lender's contact information
2. Loan Application Reference: Reference to your mortgage application number or other relevant identifiers
3. Introduction: Brief statement explaining the purpose of the letter and reference to the credit report date
4. Credit Inquiries List: Chronological list of all credit inquiries being addressed
5. Detailed Explanations: Individual explanation for each credit inquiry, including dates, purposes, and outcomes
6. Current Status: Statement about whether any new credit was actually opened and current status of accounts
7. Closing Statement: Professional closing confirming all information is true and offering to provide additional information if needed
8. Signature: Formal signature block with your full legal name
1. Rate Shopping Explanation: Include when multiple inquiries are related to shopping for a single loan type (e.g., auto loan or mortgage) within a short timeframe
2. Employment Verification: Include when credit inquiries were related to employment background checks
3. Identity Theft Statement: Include if any inquiries were unauthorized or related to identity theft incidents
4. Credit Score Impact Statement: Include when addressing how these inquiries have affected your credit score, if relevant to your application
1. Credit Report Copy: Attach relevant pages from your credit report showing the inquiries being explained
2. Supporting Documentation: Copies of relevant documents supporting your explanations (e.g., loan denial letters, employment offers, identity theft reports)
3. Account Statements: If new accounts were opened, include statements showing good payment history or zero balances
4. Timeline Summary: Optional chronological summary of all credit inquiries and related actions
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Real Estate
Mortgage Lending
Consumer Finance
Credit Services
Relevant Teams
Underwriting
Loan Processing
Credit Analysis
Risk Management
Compliance
Loan Operations
Customer Service
Document Processing
Quality Assurance
Legal Review
Relevant Roles
Mortgage Loan Officer
Underwriter
Credit Analyst
Mortgage Processor
Compliance Officer
Risk Assessment Manager
Loan Operations Manager
Credit Review Specialist
Mortgage Consultant
Financial Services Representative
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