Fannie Mae's new quality initiative puts the onus on brokers to discover the right tech tools
Greg Holmes, national director of sales and marketing, Credit Plus Inc.
As published in Scotsman Guide's Residential Edition, August 2010.
Fannie Mae introduced its Loan Quality Initiative earlier this year. The program intends to improve the mortgage-buyer's book of business by keeping out lesser-quality loans.
Mortgage brokers should know what changes to expect -- and when. Technology solutions can ease the transition.
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Many of Fannie's Loan Quality Initiative's compliance requirements took effect this past June 1. Others come into play in the next few months.
The initiative seeks to improve three areas:
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Policy
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Process
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Technology
According to Fannie Mae Lender Letter LL-2010-03 this past February, Fannie determined that these enhancements would improve compliance with its underwriting and eligibility guidelines. They also would help decrease the number of loan-repurchase requests Fannie makes of lenders. An increase in repurchase requests since 2007 led Fannie to investigate the reasons behind those requests.
Mortgage brokers wondering how to adjust to Fannie's new requirements can look to technology solutions, including those the credit-information industry provides. Innovative tools and resources can aid in compliance.
A primary initiative objective is to capture data earlier in the loan-delivery process and to ensure the completeness and accuracy of that data -- and to make sure it reflects the full scope of the mortgage's terms. The enhancements aim to do that within Fannie's existing framework and rely on lenders and brokers to act according to the new guidelines.
Focus areas
Fannie's new policy will, among other things, verify buyers' identity and occupancy, focus more closely on their credit profiles, and validate their qualifications. The initiative -- from which Fannie and Freddie Mac's Uniform Mortgage Data Program (UMDP) for loan-data delivery is culled -- also requires additional information about the subject property and its appraisal. It calls for validating loan eligibility at delivery, including requiring that loan applicants' credit reports are pulled immediately before closing to check for undisclosed liabilities.
The UMDP eventually will handle incoming files for Fannie and Freddie, both of which will mandate digital delivery of loans as of Sept. 1, 2011.
Although some of the initiative's steps already are required, others will come in the months ahead. The measures intend to ensure that loans meet requirements included in Fannie's Selling Guide (sctsm.in/fansell).
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