FHLB MPF Updates Early Payment Default (EPD) Quality Control
April 28, 2016, the Federal Home Loan Bank’s Mortgage Partnership Finance program issued PFI Advisory 2016-115 to announce an update regarding Early Payment Default (EPD) quality control. The rule takes effect May 1, 2016. View the original publication here.
The MPF Provider Quality Control Department will begin conducting quality control reviews for all conventional mortgage loans that reach EPD status on or after May 1, 2016.
All MPF Provider Quality Control reviews of EPD mortgage loans will be conducted the month after the mortgage loan first reaches EPD status. Therefore, mortgage loans reaching EPD status in May 2016 will be selected for quality control review in June 2016. All mortgage loans selected for an EPD review will be communicated to the Servicer through the normal quality control selection process.
Servicers should note that they are still required to perform their own quality control review of EPD mortgage loans in accordance with Origination Guide Chapter 28.4.1. (provided below)
For government loans, Servicers must comply with the applicable government agency’s requirements for monitoring and managing delinquent mortgage loans.
The MPF Guides will be updated in a future PFI Notice.
Additional Information from MFP Handbook (not included in the PFI Advisory)
28.4.1: Early Payment Default (EPD) Mortgages (10/18/13)
An Early Payment Default (EPD) Mortgage is defined in Servicing Guide Chapter 107.1.2.1. The quality control review of each Conventional Mortgage that becomes an EPD, even if the Mortgage has subsequently been brought current is required and the quality control review must be initiated by the Servicing PFI within sixty (60) calendar days after the date the loan reaches EPD status.
The scope of all EPD quality control reviews must include reverification of income and employment, sources of funds and credit reports. A review Appraisal, in the form of a new Appraisal or field inspection, must also be conducted (see Origination Guide Chapter 28.6 for reverification and review Appraisal requirements).
EPD quality control review reports must be submitted annually rather than individually upon completion. All of the EPD quality control review reports completed in the calendar year must be submitted annually to the MPF Bank as part of the annual eligibility certification process (see Origination Guide Chapter 5.5 for annual eligibility certification requirements).
The PFI’s quality control review of EPD loans may be used in the fulfillment of the high-risk attributes sample selection requirements of Chapter 28.4.
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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