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By now you’ve probably heard of Fannie Mae’s Day 1 Certainty Program to earn relief from certain origination reps and warranties. I hope so because it’s a good program for lenders to get a little relief when they produce quality loans.
A lender, using a Fannie authorized third party verification company, can get complete relief from the reps and warranties associated with employment, income and/or asset verifications.
If you follow all the rules and ensure the accuracy of the information used for the verifications… you’re off the hook.
There is one big caveat that we’ve noticed here at LoanLogics when reviewing loans for our clients that are enrolled in the D1C program.
You need to be careful when getting a DU validation that gives the relief for employment. Remember employment must be reverified within 10 days prior to closing. That hasn’t changed with D1C.
For now, to get the relief you may verify employment by using Equifax or the Work Number. When the loan is submitted to DU, the information is validated.
If all goes well, DU indicates the relief from the reps and warrants associated with the employment verifications. With that, there is no need to re-verify this data after closing in a post-close QC audit. This saves you time and money. Good deal eh?
When employment is validated for relief, DU indicates that the loan must close within 10 days after the DU approval date. If the loan does not close by that date, the relief for the employment verification is forfeited.
To retain the relief the lender must again verify the employment through the authorized source AND resubmit the loan through DU for an updated approval and employment validation.
If not, no relief and you must reverify the employment during a post-close QC review. No saved time and no saved money. Worse yet, no relief.
In all cases, the lender remains fully responsible for compliance with all other pre and post-closing QC review requirements. The lender must review the file as a whole to identify any inaccurate or contradictory information. The lender is also responsible for the re-verification of any information and documentation on which relief was not provided under the DU Certification.
These required reverifications would include employment when a loan does not close by the expiration date indicated in the DU approval. Be certain, close by the expiration date, or reverify and re-submit to retain relief.
D1C is a good program for lenders and for Fannie Mae, as long as everybody follows all the rules.
