FNMA Update and Reference to Elements in Plan
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FNMA RequirementLocation of Element in QuickStart Mortgage Manuals Plan
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Lender must develop and implement a QC program that provides a structure for identifying deficiencies and for implementing plans to quickly remediate those deficiencies and underlying issuesEntire QC Plan pages 1-62
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Requirement that the lender establishes specific standards for loan quality in the form of target defect rates, and to categorize defects by severity levels (with the highest severity level indicating that the loan is not eligible as delivered to Fannie Mae). Template does not establish individual standards,but allows lender to determine standards based on past experience in its own markets. Loan level deficiencies based on whether errors are compliance related - correctable (non-critical)/non-correctable (critical) and credit deficiencies (minor clerical/minor documentation/major approval) - See Quality Control Review Form/Report
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Lenders must have prefunding and post-closing loan file reviews, loan selections, reporting on results, and take action to remediate issues. Entire QC Plan
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When a lender’s file review identifies discrepancies between the data (including the property value) that was used in the underwriting decision and the data verified through the QC process, the lender must reassess the underwriting decision based on the newly verified information to determine whether the loan remains eligible as delivered. QC Plan states "Any information varies from what was originally verified, file must be re-underwritten to determine whether loan is still eligible." See Quality Control Review Form/Report
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Clarification of the existing requirement that if the lender determines that the mortgage loan was not eligible as delivered, the lender must advise Fannie Mae of these findings.QC Plan amended to include: "FNMA Reporting Process - 1.26.42" which identifies the general reporting scheme FNMA expects (there is no specific "report form", but lenders must develop their own. In addition FNMA fraud reporting is now specifically required. Fraud line process included,
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lender report on the results of both prefunding and post-closing reviews to senior management on no less than a monthly basis, and that a plan for specific correction action must be developed. 1.26.4 This reporting has always been part of the QC process, but now that FNMA requires a lender to "self-report" monthly, the executive summaries used for management can be forwarded to FNMA.
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the lender must establish minimum requirements for the skill set and expertise of the staff performing the QC file reviews.1.27.31 Qualification of QC Employees. We specify the various audit functions, but most importantly, required re-underwriting must be conducted by an individual who meets the requirement of the underwriting position as described in the underwriting/operations-HR.
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The lender must ensure that te QC vendors conducts reviews in accordance with the lender’s QC plan and Fannie Mae’s requirements1.27.4 This has always been a requirement and too many lenders have allowed QC vendors to determine what they will audit and how. You must ensure that the vendor follows YOUR plan. We have added "FNMA" as a specific investor to this section.
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Establishment of a new requirement that the lender review at least 10% of the loans reviewed by vendors, including those with and without findings. This review must be conducted by
the lender and not contracted out.
1.27.41 - this has always been part of the Quality Control process, however FNMA has stipulated that you may no longer outsource the review of the reviewer - you must conduct your own vendor review for FNMA.
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Prefunding QC should operate independently of lender’s production, but at a minimum must be conducted by someone independent of the decision on the loan being reviewed.1.27.31 - We stipulate that all QC personnel are independent of production except for those conduction financial or compliance audits.
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The lender’s prefunding QC plan must contain requirements for full reviews of loan files and analysis of data and documents prior to funding once there is sufficient documentation in the file to perform the required review. 1.23-1.24 Specifies procedure for identifying and processing loans for full audit "pre-funding".
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Specification that the Income, Assets, Liabilities, credit history and owner occupancy are re-verified.1.24 - Specifies all aspects of original verification must be reverified. Also identifies through rubric resolution of reverification issues such as unable to contact.
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Full QC process including rebuttals must be completed within 120 days from the month of the loan closing.1.24.6 Audit Schedule and Completion of Review - Specified 90 days from closing date to allow for delays.
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Lender must have random and discretionary sampling, including all origination channels, employees and branches, underwriting tracks, products1.22 – Selection Methodology - covers not only random selection at all levels, but also of production, withdrawn and declined loans
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Lenders must conduct post-closing reviews, including those related to the review of approval conditions, credit reports, owner-occupancy, reverifications of assets, data integrity reviews, and review of closing documents.1.25.4 - Identifies the scope of all documents reviewed; application, underwriting, closing, post closing document reviews.
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Lenders must conduct annual review of an appraiser’s state licensing or certification status, a procedure for suspending or terminating business with individual appraisers, and a procedure for referrals of appraisers to the applicable state appraiser licensing and regulatory board. Part of Vendor Management Process and Appraiser Independence Rule. - Not (technically) a part of quality control. Quality reviews of appraisals can result in a referral to the appraisal management process.
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