Fannie Mae Updates Servicing Policy and Clarifies Quality Control
by: Anna DeSimone
March 14, 2014 Freddie Mac issued a Single Family Update regarding its quality control process. Changes apply to two areas: first, permitting sellers to submit missing and incomplete documents during performing loan (PL) reviews; and second, refinement of Freddie Mac’s targeted PL sampling methodology. The update encourages Seller/Servicers to refer to Industry Letter dated October 19, 2012 for further information regarding Freddie Mac’s new QC framework which went into effect January 1, 2013. Please refer to my article for a detailed description of that change: Freddie Mac QC Framework, October 2012
Allowing Submission of Missing or Incomplete Documents for Performing Loan Reviews
Beginning April 1, 2014, sellers will be able to submit any missing or incomplete PL documents, including anti-predatory lending compliance loans that could impact a loan decision. Loan manufacturing process trends may surface during the reviews, enabling sellers to correct possible deficiencies in their documentation, collection, and transfer processes. This new process will allow Freddie Mac to make a proper loan decision and ultimately reduce the number of repurchase requests and subsequent appeals.
For this process sellers will receive an email with spreadsheets attached listing the PLs under review where Freddie Mac’s underwriters identified missing or incomplete documentation, including the specific documentation needed to make the final loan decision.
Freddie Mac will use the same notification process they use when notifying sellers of missing or incomplete documents for non-performing loans (NPLs). If sellers do not return the requested documentation within 14 calendar days from this notification, Freddie Mac’s underwriters will make a final loan decision based on the documentation in the file.
If the loan is determined to have a material defect in addition to missing or incomplete documentation, sellers will only receive a repurchase request. The repurchase request will identify both the QC issue and the missing or incomplete documents.
Refining of Freddie Mac’s Targeted PL Sampling Methodology
As announced in the October, 19, 2012, Industry Letter, new technology and data-gathering tools used to analyze loan-level data, including the Uniform Loan Delivery Dataset (ULDD) and the Uniform Collateral Data Portal, have enabled Freddie Mac to refine its targeted PL sampling methodologies. As a result, sellers may notice a slight increase in targeted review numbers and a change in the types of loan files requested.
Targeted samples are selected based on several factors; including underwriting, credit, collateral, and capacity. Refining the sampling methodology will help Freddie Mac better understand the loans being originated in the market and delivered to the Enterprise.
As a reminder, sellers are encouraged to use Freddie Mac’s QC review findings to identify and correct possible deficiencies in their loan manufacturing process to help ensure the loans delivered to Freddie Mac are eligible for sale. Sellers will see more of these changes throughout 2014 as the Freddie Mac continues to refine and adjust its PL targeted methodology.
Please refer to the Seller/Servicer Update for additional information, resources and reference links.
About the Author
Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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