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Question:

What are Fannie Mae’s new loan selection recommendations for a mortgage lender’s risk based monthly Pre-Funding Quality Control (QC) selections?

Answer:

Fannie Mae recently enhanced its pre-funding quality control requirements. Fannie Mae’s March 1, 2023 updates (D1-2-01, Lender Pre-funding Quality Control Review Process) introduced new recommendations for a lender’s monthly pre-funding QC loan selection criteria.

Fannie Mae requires that Pre-Funding QC reviews target areas that the lender identifies as having a higher potential for errors, misrepresentation, or fraud. Fannie Mae sets forth the following targeted areas for a lender’s consideration in this regard.

• Loans with characteristics or circumstances related to errors or defects identified in prior pre-funding and post-closing review results;
• Loans with complex income calculations (for example, rental income, self-employed, and short history of receipt of income);
• Loans requiring the use of non-standard processing or underwriting guidelines (for example, delayed financing, multiple financed properties, assets used as income, or manual reserve calculations);
• Loans secured by properties located in areas with high delinquency rates or areas experiencing rapid increases or decreases in property values;
• Loans with flags and messages that indicate potential overvaluation or appraisal quality issues on appraisals scored through Collateral Underwriter;
• Loans with multiple layers of credit risk, such as high LTV ratios, low credit scores, or high DTI ratios;
• Loans originated or processed through various business sources, a particular branch office, staff person, contractor, third-party originator, or appraiser;
• Loans that test the effectiveness of action plan controls;
• Loans originated or processed by newly hired loan officers, processors, appraisers, or other personnel or third parties involved in the loan origination process; and
• Loans for which the feedback or results from third-party tools indicate potential areas of concern.

Please note that these are suggestions from Fannie Mae and not an exclusive list.