It seems like a simple question. According to Fannie Mae Quality Control guidelines, a lender need not reverify or recalculate, as applicable, information that is validated by Fannie’s Desktop Underwriter (DU), under their Day 1 Certainty Program. This includes the qualifying information for employment, income, and assets for each borrower.
When a lender receives the validation of data from DU, they receive relief from any related reps and warrants, as well as relief for the reverification requirements for the validated data. Or, so it would seem.
Recently, I live streamed a panel presentation from the MBA Risk Management, QA and Fraud Prevention Forum, from Miami.
(BTW, this is a good way to get some conference info when you can’t make the conference in person. Okay back to the issue at hand…)
In his presentation, Duane Gilkison, the Director of Credit Risk Management at Fannie Mae, confirmed that under the Fannie Mae QC guidelines a lender is not required to perform reverifications of DU validated data. Yeah! But wait for it…
He also made it quite clear that Fannie Mae recommends to lenders as a best practice that they continue with these reverifications, even when they receive the DU validation and the rep and warrant relief.
He said that Fannie believes very strongly…
in the reverification process and that some inconsistencies may still exist, regardless of the DU validation process.
I guess Fannie believes it’s better to be safe than sorry. He and a Fannie Mae representative in the audience did confirm that when DU provides the validation if all information submitted is accurate, the lender gets their relief. This is true even when a subsequent problem may be discovered. That’s cool.
(BTW, I didn’t see who it was or get the name since I was live streaming.)
An example that was presented was the result of a question raised whereby a borrower gets approved and DU validated one income. But, it is learned through a subsequent reverification that the borrower filed an amended return after closing with reduced income. (This seems like a good reason to not reverify.) Anyway, Fannie said that as long as everything was done properly the lender still gets the rep and warrant relief.
The Day 1 Certainty program seems like a good deal for lenders. Take the application, verify employment, income, and assets through a Fannie approved vendor, get validation from DU and you are relieved of the potential of further action from Fannie under your related reps and warrants, right? This is true as long as there are no misrepresentations.
Now, it seems there may be some uncertainty in the Day 1 Certainty program. To reverify or not to reverify, that becomes the question.
The guidelines say no, but Fannie recommends yes. It’s up to each lender to decide.