Loan Quality Initiative (LQI) FAQs Updated July 29, 2010

Transcription

1 Loan Quality Initiative (LQI) FAQs Updated July 29, 2010 These FAQs provide additional information related to Lender Letter LL , An Introduction to Fannie Mae s Loan Quality Initiative, Announcements SEL and SEL , and EarlyCheck. For other resources, visit the Loan Quality Initiative page on efanniemae.com. Also refer to the Uniform Mortgage Data Program information, including FAQs, on efanniemae.com. Contents General...1 Undisclosed Liabilities Policy...3 Excluded Parties Policy...3 Borrower SSN or ITIN Policy...4 Borrower Occupancy Policy...5 Loan Delivery Edit Reports...6 Validation of Loan Delivery Data...7 EarlyCheck...9 Delivery of Electronic Appraisal Data...9 Collection of Additional Loan Data at Delivery and Transition to MISMO XML Format...9 Updated Lender Quality Control (QC) Requirements...10 General NOTE: This document was first published on February 26, 2010, in conjunction with the release of Lender Letter LL , and updated on March 5, May 12, May 28, June 7, July 14, and July 29, Content that is new or substantively updated since the May 12 version is indicated by NEW or UPDATED. Q1. If relaxed underwriting guidelines contributed to mortgage industry challenges in the past several years, isn t the significant contraction in credit parameters addressing that problem? Why is Fannie Mae focused on driving the quality of loan data through the Loan Quality Initiative (LQI)? In recent months, we have seen a large portion of Fannie Mae s postpurchase file reviews with material differences between the loan data delivered to us and the actual facts of the loan (differences caused by data mismatch, calculation errors or other inaccuracies, misrepresenttation, or fraud). Many of the repurchases resulted from this gap in data accuracy. By focusing on facilitating a match between the loan file data and the delivery data in both the loan origination and loan delivery processes, Fannie Mae will not only be able to provide faster MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 1 of 12

2 feedback on quality, but should also be able to work with lenders to reduce, over time, the number of file reviews and repurchases for data quality issues. Q2. Does this effort limit the decision-making ability that lenders currently have? Is Fannie Mae attempting to insert itself into the loan origination process? The lender s role as the loan originator and Fannie Mae s role as the investor will not change. On the contrary, we believe the lenders role in collecting and validating accurate data and then making sound underwriting decisions is more important than ever. As an investor, Fannie Mae provides market liquidity, while relying on our lender partners to make loan origination decisions in compliance with our guidelines. We share the industry s commitment to getting back to the basics that served the industry well over many years. But in the face of increasingly more sophisticated fraud schemes and the dual goals of efficiency and the prudence of a thorough and exhaustive process, we are seeking a more sophisticated industry approach. We plan to implement a new approach for selling loans into the secondary market that builds on sound underwriting principles with loan data that is complete, accurate, and validated. Through our LQI, we are establishing policies and processes that will support accurate and complete data capture and verification. Our goal with the LQI is simply to arm our lenders with policies, tools, and resources so that their decisions are based on more complete data, and loans meet Fannie Mae requirements. Our lenders have told us that they want more certainty early in the origination process preferably prior to loan closing that loans they plan to deliver to us will meet our eligibility guidelines, contract terms, pricing, and all other requirements, resulting in a smoother delivery process and more limited repurchase risk. Fannie Mae seeks to support all market participants by enabling a sustainable business approach to reduce or eliminate data error spikes and support stability in all market cycles. Q3. UPDATED Lenders will have to invest resources to comply with many of Fannie Mae s new requirements; what can they expect in terms of short-term and long-term benefits? Fannie Mae, as the investor, seeks to increase our confidence in the data supporting the loans we purchase or guarantee. But we also believe that, primarily by leveraging advances in technology, we can provide updated processes and tools that will not only satisfy our business needs, but also provide benefits for our lender partners. We understand that implementing these changes will require some effort, but we believe that in the short term, most lenders will benefit by reduced repurchase risk and decreased fee and data reconciliation activity. In the long term, lenders will potentially see reduced repurchase risk as well as process efficiencies based on pre-verified loan characteristics and more certainty about the loan characteristics. We hope lenders will also see the merits of better data, especially as we all work to reduce data errors that could result in faulty loans. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 2 of 12

3 Undisclosed Liabilities Policy Q4. UPDATED How would a lender confirm that undisclosed liabilities are not present in a transaction, through the closing of a transaction? The lender is responsible for implementing practices to identify undisclosed liabilities in a transaction. It is the lender s responsibility to develop and implement its own business processes to support compliance with Fannie Mae s requirements on loans delivered to us, and many lenders already had such processes in place prior to issuance of Announcement SEL The Selling Guide update was not intended to require additional credit report pulls or underwriting at the time of closing. Rather, we sought to reiterate our requirement that lenders have in place prudent processes and controls that support their ability to fully assess the borrower s financial circumstances, which increases the probability of the borrower being able to successfully repay their mortgage obligation over the life of the loan. Based on lender feedback, Fannie Mae is reviewing the policy and intends to provide additional guidance by the end of July. NOTE: Fannie Mae has not changed the policy as it relates to credit reports. Credit documents, including the credit report, are valid for 90 days from the date of the report and may not be older than 90 days at time of closing (i.e., the date that the Note is signed by the borrowers). Excluded Parties Policy Q5. Historically, Fannie Mae has not required use of excluded party lists for validation of qualified parties to the transaction, even though other key industry participants did so. What has changed? Fannie Mae has heard from many of our lender partners that the adoption of excluded party lists in the mortgage origination process both proprietary lists and public lists may be a useful tool in combating mortgage fraud. We are moving to align our policies with common industry practice by requiring our lenders to adopt the use of two public federal government excluded party lists one maintained by HUD and a broader one managed by the General Services Administration. These federal lists cover a broad array of risk categories, including fraud, gross negligence, and lack of business integrity. Individuals have been placed on these lists for both mortgage-specific and non-mortgage-specific activities. Q6. What is Fannie Mae s expectation of lenders for complying with the policy regarded excluded parties? Fannie Mae expects that each lender will develop its own policies and procedures for ensuring that parties to the mortgage transaction are not on either of the excluded party lists. It is recommended that the lender establish a procedure for its hiring process that will ensure potential employees are not on the excluded party lists. The lender should also establish a procedure to ensure that the employees of any third-party service provider have been checked against the excluded party lists. The lender should periodically confirm that the status of MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 3 of 12

4 employees and third-party service providers with respect to the excluded party lists has not changed. Q7. NEW Does Fannie Mae intend to provide more specific guidance to lenders about the expectations for compliance with the excluded parties policy? We appreciate the feedback from our customers regarding implementation of this policy, and we are considering providing additional guidance in the near future to assist lenders in meeting our requirement. Q8. If a party has been placed on HUD s Limited Denial of Participation List or GSA s Excluded Parties List, and the exclusion is limited to a defined geography or a specific federal agency, will Fannie Mae consider the party excluded? Regardless of the scope of the disqualification or exclusion, loans will be ineligible for delivery to Fannie Mae if any party to the transaction is included on either list. For example, a party to the transaction who is excluded from participating in HUD multifamily programs or excluded from participating within a narrowly defined HUD geography would be considered by Fannie Mae as an excluded party and the loan would be ineligible for delivery to us. The exclusion would apply to all Fannie Mae products/transactions secured by properties in all geographies. Any party listed on the GSA excluded party list, regardless of exclusion type, agency, or CT (cause and treatment) code would be considered an excluded party, and the loan would be ineligible for delivery to Fannie Mae. Borrower SSN or ITIN Policy Q9. UPDATED For loans that are manually underwritten, or are underwritten through an automated underwriting system (AUS) that is not DU, how would a lender determine that a borrower s Social Security Number (SSN) is valid? Lenders may use existing tools commonly available through various vendor services to perform these tests. Some checks on SSNs may be available through services that lenders already use; for example, HAWK-Alerts on TransUnion credit reports can alert the lender that an SSN may be invalid. (Note that Fannie Mae does not endorse specific vendor services; lenders must make their own decisions about how to meet our requirements for loans delivered to us.) Additionally, EarlyCheck will help lenders check the validity of SSNs. To ensure a smooth transition, the validation capability will be available prior to implementation of hard-stop delivery edits on SSNs. (See EarlyCheck section for details.) As a reminder, if the borrower s SSN fails to pass any validity checks whether identified by a vendor service, DU, or Fannie Mae s Loan Delivery system the lender is responsible for resolving the issue. Potential validity issues include invalid format, number not issued, borrower age/issue date discrepancy, or SSN associated with a deceased person. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 4 of 12

5 Q10. NEW Can a lender use an IRS Form 4506-T to validate the borrower s Social Security number? Processing Form 4506-T will not validate the SSN. The IRS does not conduct the four validation checks that the Social Security Administration (SSA) performs, which are: invalid formats, numbers not issued, borrower age/issue date discrepancies, and SSN associated with deceased individuals. The IRS will only check SSA records to verify that the borrower name matches the borrower SSN (within two digits). Some vendors that offer services to process 4506-T requests with the IRS also offer SSN validation services, so lenders may be able to use a vendor for both services; but only the SSA can validate a borrower s SSN, so the vendor must go through the SSA for that purpose. Q11. The Selling Guide states that lenders must attempt to resolve SSN issues identified by DU or Fannie Mae's Loan Delivery system before requesting verification from the SSA. How would the lender resolve the SSN issues without contacting the SSA? In some cases, SSN issues stem from a data entry error and therefore are resolved when the lender corrects the error. The lender should carefully review the borrower data to ensure the information is correct and resubmit the information as necessary. If the SSN issue persists, the lender must verify the SSN with the SSA (either directly or through a third party). Q12. Has Fannie Mae modified its policy on the acceptance of an ITIN in lieu of a Social Security number? As stated in Lender Letter LL and Selling Guide Announcement SEL , a valid SSN or ITIN will be required in addition to the borrower meeting existing legal residency and documentation requirements. We are not revising our legal residence requirement, and we are not participating in what is commonly known in the primary market as ITIN lending. In a few instances, an individual may be a legal resident of the United States and ineligible for an SSN, but required to file tax returns for earned passive (non-salary) income. In this scenario, the use of an ITIN would be appropriate, provided the lender can document the borrower s legal residency status. Borrower Occupancy Policy Q13. How can a lender confirm the borrower s intent to occupy the property? Lenders are responsible for implementing practices to identify potential misrepresentation, investigate potential red flags, and take appropriate steps to verify occupancy. Some examples include: In a refinance transaction of a primary residence, if the borrower indicates a current address that is different from the property address, the lender should investigate and obtain additional documentation as appropriate. If the borrower purchased a primary residence and soon thereafter purchased another primary residence, the lender should obtain documentation that confirms that the home most MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 5 of 12

6 recently purchased will be the borrower s primary residence. Appropriate documentation will depend on the circumstances, but possibilities include a contract with a moving company and utility records. Steps that lenders might take to confirm occupancy include: Review the hazard insurance policy or utility bills to confirm occupancy of the property. Employ third-party services that specialize in investigating occupancy information. Loan Delivery Edit Reports Q14. What is the content of the Loan Delivery Edit Reports, and how should they be used? The content of the reports is based on the Loan Delivery edits that will be implemented over the next year. The reports compare the data used in loan deliveries of the current time period against the future edits, including the new mandatory delivery fields, LTV and debt-to-income ratio calculations, and provision of a valid DU casefile ID for DU loans. The reports enable lenders to detect future hard-stop issues before the edits are implemented as fatal and provide the lenders an opportunity to make changes to the data file or process before the hard-stop edits begin. Lenders should access and review the reports regularly through the implementation of the hardstop edits in July 2010 and January 2011 to ascertain the impact of the future edits on the lender s delivery process. Monthly checks of the reports will ensure pro-active measures taken in the lender s organization can be tracked and verified as mitigating future edits and delays at funding. Q15. UPDATED How are the reports distributed? Lenders can retrieve monthly reports (which became available in April 2010) via Message Manager (available to registered Loan Delivery users). The reports are listed as Loan Delivery Edit Reports and highlight each lender s current deliveries against the list of future hard-stop edits that will be implemented in the July 2010 and January 2011 Loan Delivery releases. The reports provide the full list of edits (and the percentage of incorrect or missing attributes that will cause the edit), as well as the timing of the individual edits (to assist in prioritizing changes to process or data files). View Loan Delivery/Message Manager information on efanniemae.com for details, including job aids for accessing and using the reports. Some lenders will notice that multiple reports appear in Message Manager. Based on customer feedback, we ve provided reports for deliveries under each seller/servicer number; customers who deliver under two or more seller/servicer numbers will receive two or more sets of reports. Any questions about the reports should be directed to the lender s Customer Account Team, which can assist with interpreting the reports as well as process analysis to identify possible areas for change. Q16. NEW Why are Loan Delivery Edit Reports in Message Manager not available for all lenders? If lender-specific Loan Delivery Edit Reports are not posted in Message Manager, there were no loans with delivery discrepancies. To provide greater clarity, Fannie Mae plans to add a message to Message Manager indicating that no report means there are no Loan Delivery Edit MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 6 of 12

7 issues to review. In the near future, we will also post delivery reports for all lenders that have delivered during the report period, regardless of delivery discrepancies results. Lenders with no discrepancies will receive a report advising of error-free deliveries. Q17. NEW Why would loans be appearing in the reports as failing the edit DTI Limit Flag, Column K (that will be implemented July 26, 2010) if it appears that the loans received a DU Approve/Eligible recommendation? To help lenders better understand the impact of soon-to-be-implemented fatal edits, Fannie Mae is providing sample reports simulating how prior deliveries would fare with the new edits. Most likely, loans failing the DTI limit edit in the simulation reports were underwritten through DU Version 7.0 or DU Version 7.1, which allowed a DTI ratio higher than 50 percent. Loans underwritten with DU Version 7.0 or DU Version 7.1 that were delivered early in 2010 may have received an Approve/Eligible recommendation from DU with the higher DTI allowance. With the exception of DU Refi Plus, loan casefiles underwritten with DU Version 8.0 (as well as future versions of DU) are subject to a maximum DTI ratio of 50 percent. Q18. NEW Why would a loan s DU DTI ratio differ from the DTI ratio calculated by Loan Delivery? The most likely reason for the difference relates to the monthly debt expense that is used in calculating the DTI ratio. The monthly debt expense used by DU when calculating the DTI ratio includes only the debts considered in qualifying, which does not include revolving or installment debts with 10 payments or less remaining. This monthly debt expense is shown as the Total Expense Payment, on the DU Underwriting Analysis Report. If lenders deliver a monthly debt expense that includes all debts, regardless of the number of payments remaining, rather than delivering the monthly debt expense that DU considered in qualifying, there could be a difference in the two DTI ratios. Validation of Loan Delivery Data Q19. Will Fannie Mae lenders need to change their systems to support the change in the LTV rounding rules? Currently, Fannie Mae does not calculate LTV at delivery, but instead edits for eligibility based on the lender-delivered LTV. DU uses a standard rounding methodology and rounds up at six decimal places. The new LTV calculation methodology will be implemented in both DU and Loan Delivery (when calculating the LTV, LD will truncate at two decimal places and round up to the nearest whole number). Lenders do not need to change their systems if they use a standard rounding methodology in which at least two decimal places are captured and the result is rounded up (this is common industry practice). In the event that a lender rounds down or doesn t capture at least two decimal places, a change in rounding methodology will be required. For example, it would be acceptable if the lender s system captures an LTV of and rounds it up to 81 percent in the delivered LTV field; however, if the lender s system rounded down to 80 percent LTV, the LD-calculated LTV would be 81 percent, which could result in delivery failure. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 7 of 12

8 Q20. Lender Letter LL states that the updated rounding methodology will be implemented in DU later this year; does that mean DU will apply different methodology until then, and will that cause any issues with Loan Delivery edits? Until the updated methodology is implemented in DU, the current rounding methodology will continue to be used rounding up from six decimal places potentially resulting in a higher LTV than with the new delivery rounding methodology. If a lender adopts the new methodology before DU is updated, there could be a difference between the LTVs calculated by DU and the lender, which could trigger a warning at delivery (beginning July 26, 2010). If the lender is confident that their methodology meets the updated criteria, the warning can be ignored. DU will be updated before hard-stop edits are implemented in Loan Delivery (January 3, 2011). Q21. Why are there no delivery warnings for the Date of Birth (DOB) field? Because lenders generally are not providing the DOB field at delivery today, warning edits were delayed, but will be implemented in September Until then, loans without DOB data are identified through an Informational status category in the Lender Delivery Reports lenders can run reports on this category to identify future delivery problems that may occur once the field becomes mandatory. Q22. Why is Fannie Mae implementing hard-stop delivery edits based on DU versus delivery data? Do all data fields need to match exactly to pass this verification? This change reflects a long-standing Fannie Mae policy that the last DU submission must match the loan delivery data. Currently, there is a post-delivery reconciliation process that is cumbersome for lenders and carries risk if the loan was ineligible or priced incorrectly. To implement a more efficient process, Fannie Mae will check DU data at delivery. Later this year, lenders will be able to perform these same checks at any time in the loan process using EarlyCheck. Some data fields need to match exactly; others will be analyzed to determine if they are within the tolerances established for DU loans. For example, if the loan is submitted in DU as a cashout refinance, but delivered as a limited cash-out refinance, the loan would fail at delivery. On the other hand, if a loan casefile is submitted to DU with a loan amount of $100,000 and the appraised value is $120,000 (which equals 83.3% LTV), and the loan amount increased to $100,500 (which equals 83.75% LTV) the loan would not fail at delivery. Q23. With the new requirement for lenders to provide at delivery the borrower s total monthly debt expense, how would that figure be determined? For DU loans, the lender should use the Total Expense Payment shown on the last version of the DU Underwriting Analysis Report. For non-du loans, the lender should use the debt that was used to qualify the borrower(s). MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 8 of 12

9 EarlyCheck EarlyCheck FAQs are now in a separate document. Delivery of Electronic Appraisal Data Q24. When will Fannie Mae require delivery of electronic appraisal data, per Selling Guide Announcement and Lender Letter LL ? On May 24, 2010, we announced the Uniform Mortgage Data Program (UMDP), through which we are working with Freddie Mac to implement uniform appraisal and other loan delivery data standards, as well as a joint appraisal data delivery system. The Uniform Collateral Data Portal (UCDP) will be available in October Lenders will be required to deliver electronic appraisal data via UCDP for all loans delivered to either Fannie Mae or Freddie Mac on or after April 1, 2011 that also have application dates on or after January 1, When implemented, lenders may access the portal through a web-based interface or direct system-to-system integration. For more information, refer to the UMDP page on efanniemae.com. Collection of Additional Loan Data at Delivery and Transition to MISMO XML Format Q25. What is MISMO? The Mortgage Industry Standards Maintenance Organization (MISMO) is a not-for-profit subsidiary of the Mortgage Bankers Association. MISMO s purpose is to develop, promote, and maintain voluntary electronic commerce standards for the mortgage industry, intended to promote data consistency, reduce processing costs, and increase transparency through a repository of industry data elements stored in a common data dictionary. MISMO coordinates the development and maintenance of Internet-based Extensible Markup Language (XML) real estate finance specifications. For more information on MISMO, please visit Q26. Why is Fannie Mae moving to require use of the MISMO Version 3.0 XML format and retire the 2000-Character Loan Delivery File Format? The MISMO XML format provides greater flexibility than the current approach by allowing us to more easily collect new data, as well as supporting more current technology that is widely used in the mortgage industry. Use of MISMO XML will also allow a greater level of specificity in the data that lenders provide to us, using an industry standard that is also more extensible for lenders other purposes throughout the loan life cycle. XML also supports extraction of data elements into databases for later risk management and analysis. With adoption of the MISMO XML format, lenders should expect a more dynamic approach to delivery data collection, with periodic updates to the XML format standard and data MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 9 of 12

10 requirements; the flexibility of the MISMO-based format and data will be less static than the 2000-Character file format has been. Q27. Are details about the additional delivery data and the MISMO format available? Under the UMDP (referenced in Q34), we are working with Freddie Mac to implement the Uniform Loan Delivery Dataset. Details will be published in June 2010, and effective September 1, 2011, the MISMO v.3.0 dataset and file format must be used for all loans delivered to either Fannie Mae or Freddie Mac. For more information, refer to the UMDP page on efanniemae.com. Updated Lender Quality Control (QC) Requirements Q28. NEW Are lenders required to perform the random 10 percent sampling (or acceptable statistical sampling) on all loans, or only on loans sold to Fannie Mae? A minimum 10 percent review (or acceptable statistical sampling) must be completed on all residential mortgage loans a lender originated or acquired from a third party in order to comply with Fannie Mae guidelines. Q29. NEW What is the purpose of pre-funding reviews? The purpose of the pre-funding review is to validate the accuracy of the loan information and identify gaps in the process or additional training needs. The pre-funding review process should include controls or checks that test the accuracy of the loan data to ensure the information obtained is correct (e.g. borrower identity, employment, financial information, property information). Q30. NEW Can pre-funding loan reviews be completed outside the lender s quality control department? Can production staff complete this review? Yes. The pre-funding reviews do not have to be performed by the lender s quality control staff. The lender may designate any member of its staff to perform the validation reviews; however, the reviewer must be someone other than the individual who initially obtained the data. Even if the pre-funding review is completed outside the quality control department, regular tracking, reporting, and trending along with corrective action plans should be incorporated into the executive review process to ensure that identified inadequacies or defects have been remedied. Q31. NEW During the post-closing QC review, must a tri-merge credit report be pulled? Yes. A new credit report must be pulled for each loan selected for a post-closing review for which the lender obtained a traditional credit report. This policy applies for all loans whether they were manually underwritten or underwritten by an automated underwriting system. The request for a post-closing credit report must include information from the three credit repositories, or two repositories if that is the extent of the data available for the borrower. The credit report used for the post-closing review must be obtained from a different source/vendor than the original credit report. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 10 of 12

11 Q32. NEW What is the objective of the audit of the QC policy and procedures? The objective of the QC audit is to validate that the QC policies and procedures are being followed and that the reviewers conclusions concerning determination of defects and their severity are applied consistently and recorded. Results of the audit should be reported to the lender s senior management, which is responsible for ensuring that results are distributed to the appropriate areas within the organization and remediation enacted if warranted. Q33. NEW Selling Guide Section D states a Lender must have an audit process to ensure that its QC process and procedures are followed. What is the required frequency of this audit? It is the lender s responsibility to determine the frequency of the audit; however, the audit should be frequent enough to ensure the QC plan is effective. The audit must review the completeness of the QC process and the success of the reporting and corrective action process. The lender should consider several factors when determining the audit review frequency, including, but not limited to, loan volume, defect rates, and overall loan performance. Q34. NEW Who can conduct the audit of the QC processes and procedures? The audit must be conducted by a department outside of the quality control department and it must be an unbiased independent review. The QC audit may be outsourced. Q35. NEW Can Fannie Mae clarify the timing of when loans should be selected for post-closing QC review and when management reporting must be completed? Lenders must select loans for their post-closing QC review, at minimum, in the month following the loan closing. The lender has 60 days to complete the loan reviews, and an additional 30 days to report all findings to management. For example: Loans close June 1 June 30 Loans from June closings are selected for review on July 15 Loan reviews must be completed by September 15 Final reporting to management must be completed no later than October 15 Q36. NEW Selling Guide Section D outlines lender requirements for defining and setting standards for loan quality. What does this mean? Fannie Mae expects a lender s QC plan to define the lender s credit culture and detail the lender s expectations for loan quality. Each lender should outline its expectations for acceptable risk by determining an acceptable defect rate and monitoring their performance against this standard on a regular basis. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 11 of 12

12 Q37. NEW Fannie Mae has stated that it is expanding its monitoring and assessment of the effectiveness of lender QC plans to provide consistent feedback to lenders. How will this be implemented? Fannie Mae has recently created a new Quality Control Specialist position, specifically designed to review lenders QC programs and provide feedback based on their assessments. This is in addition to the Lender Assessment of Risk and Controls (LARC) team, which has a component of quality control but performs an independent assessment of Seller/Servicer compliance with Fannie Mae requirements and operational risk and controls. MERS is a registered trademark of MERSCORP, Inc., and MISMO is a registered trademark of MISMO, Inc. Updated Page 12 of 12