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Question:  Does Fannie Mae require a mortgage lender to maintain a self-reporting component to its quality control (QC) program?

Answer: 

Yes, self-reporting is a vital component of robust quality control standards and a key factor of Fannie Mae’s mission to promote the stability of the housing market. 

Fannie Mae published a Quality Insider titled “The Scoop on Self-Reporting” (August 2024 edition), which sets forth instructions on how to self-report and provides useful tips to assist mortgage lenders with the self-reporting function.  For example, Fannie Mae suggested maintaining a log that tracks self-reporting, explained how the most efficient self-reporting is inclusive of all relevant information and supporting documents, and provided a link to a Self-Report Job Aid.

Lenders must self-report a loan to Fannie Mae if they find the loan: 

• Is in breach of selling warranty;
• Is not in compliance with federal or state laws; and/or
• Exhibits traits of misrepresentation, fraud, and/or money laundering activities. 

Fannie Mae’s Selling Guide (D1-3-06) requires lenders to self-report to Fannie Mae within 30 days of identifying one or more defects that result in the loan being ineligible for sale to Fannie Mae.   

Notably, Fannie Mae conducts audits of lenders’ self-reporting during a Mortgage Origination Risk Assessment (MORA) and QC calibration reviews.  Fannie Mae noted findings from these reviews for the following: 

• Lenders’ QC plans did not include procedures to self-report; 

• Lenders were not self-reporting within the required 30-day timeframe; and/or

• Lenders were not self-reporting loans obligated to be self-reported.

It is important to note that Freddie Mac, FHA and VA also maintain requirements surrounding self-reporting in relation to QC.  Below are links to their requirements:

• Freddie Mac Guide Section 3402.10(b) – includes list of items that must be reported through the Freddie Mac Quality Control Tip Referral Tool in Freddie Mac Loan Advisor and Servicing Gateway.   A Seller must notify Freddie Mac within 90 days of the seller’s determination that a quality control finding affects the eligibility of a mortgage sold to Freddie Mac, except that if a finding is related to fraud or possible fraud, a seller must notify Freddie Mac within 60 days of the finding.

• FHA / HUD Handbook 4000.1, V, A, 2 – must report all findings of fraud and material misrepresentation immediately.  Must report all material findings concerning origination, underwriting, or servicing that the lender is unable to mitigate no later than 90 days after completion of the initial findings report.  With the report to FHA, the lender must identify actions it has taken to attempt to mitigate each finding and report any planned or pending follow-up activities.  

• VA Pamphlet 26-7, Chapter 1, Section 14(f) – must promptly report any violation of law or regulation, false statements or program abuses by the lender, its employees or any other party to a VA loan transaction to the VA Office of jurisdiction.  This requirement must be outlined in the lender’s QC Plan.