Fannie Mae Updates and Clarifies Quality Control Requirements
by: Anna DeSimone
July 29, 2014 Fannie Mae issued SEL-2014-10, “Selling Guide” updates. The update included changes to the following:
- Significant Derogatory Credit Events
- Property Insurance Requirements
- Lender Quality Control Policy Updates and Clarifications
- Notification Requirements for Misrepresentation or Breach of Selling Warranty and Fraud
- MBS Buyup and Buydown Ratio Grids
- Incorporation of Announcement SEL-2014-08, Fannie Mae Announces Approved Mortgage Insurance Forms
- Incorporation of Announcement SEL-2014-09, Anti-Money Laundering Requirements
- Special Feature Codes
- Miscellaneous Selling Guide Update
Please note that this article covers only item #3 above.
Please refer to the Fannie Mae announcement for further information. The updated topics are dated July 29, 2014.
Lender Quality Control Policy Updates and Clarifications
Several updates and clarifications are being made to the requirements contained in Subpart D1, Lender QC Process, of the Selling Guide.
Lender Quality Control Plans and Processes (D1-1-01)
Clarified that the minimum requirement is to set a target defect rate for the highest severity level for post-closing, random quality control (QC) samples. Target defect rates are not required to be set for lower severity levels, prefunding QC reviews, or discretionary reviews.
Lender Quality Control Staffing and Outsourcing of the Quality Control Process (D1-1-02)
Clarified that the requirement to review 10% of a QC vendor’s work applies only to post-closing QC sample reviews.
Lender Prefunding Quality Control Review Process (D1-2-01)
For loans acquired from a delegated third party, the lender’s written prefunding QC plan that outlines requirements for reviewing a sample of its loans prior to closing must include review of a sample of its loans prior to acquisition.
Lender Post-Closing Quality Control Review of Approval Conditions, Underwriting Decisions, and Documentation (D1-2-01)
Clarified that although financial institutions may charge lenders a fee for reverification of assets, Fannie Mae’s expectation is that the reverification be obtained notwithstanding any fee the institution may charge.
Lender Post-Closing Quality Control Review of Appraisers and Appraisals (D1-3-04)
Clarified that the 10% field review requirement is based on loans in the random sample that have an appraisal. Lenders are required to complete a desk review to evaluate the appraisal for the remaining 90% of mortgage loans the lender selected for QC review as part of its random sample.
Lender Post-Closing Quality Control Reporting, Record Retention, and Audit (D1-3-06)
Updated to direct lenders to A2-2-01, Contractual Representations and Warranties, and A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud, for details of self-reporting responsibilities related to misrepresentation or breach of selling warranty, including fraud.
Effective Date
These changes are effective immediately.
Anna 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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