In Fannie Mae’s Lender Letter-2015-03, it is indicated that, as of December 31, 2014, only .33% of the single-family loans acquired in 2013 (based on principal balance) had been subject to a repurchase request by Fannie Mae.
This low percentage of repurchase requests is indicative of the better quality of loans being originated due, in large part, to the increased usage of various loan quality and risk assessment tools. Some examples are:
- Obtaining feedback from Fannie Mae’s “Uniform Collateral Data Portal” on the quality of appraisals being submitted to Fannie Mae.
- The “Desktop Underwriter” (DU) automated underwriting system which has a well- established track record in the overall credit risk assessment of a loan transaction
- The recent roll-out of “Collateral Underwriter” (CU) which provides a substantive automated review of the appraisal report and helps identify potential problems and red flags with the appraisal.
- Through “Early Check” – lenders can obtain case-specific feedback in identifying and correcting data integrity problems prior to the formal delivery of the loan to Fannie Mae.
- Review results obtained via Fannie Mae’s “MORA audits” will assist lenders in improving their overall loan origination and QC functions in the future.
These tools, combined with more Webinars and conferences being conducted by Fannie Mae, as well as more dialog between the lenders and their Fannie Mae Customer Account Team have helped to enhance the overall loan manufacturing process on Fannie Mae loan transactions.
Let’s hope that this trend continues if interest rates creep up and it becomes more difficult in qualifying prospective borrowers. As past history has shown, the urge to originate lesser quality loans becomes greater when volume starts declining. This time around, however, lenders will have more advanced tools available to them to properly assess their overall risk.