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Fannie Mae introduced their new Day 1 Certainty program for relief from the reps and warrants related to the verification and reverification of employment, income, and assets. Good news for lenders.
To obtain the relief, lenders need to validate information through Fannie approved vendors. At present those are limited to;
- The Work Number for employment and income
- Equifax for tax transcripts, when needed, and
- Asset Check by FormFree for the assets.
A lender may also use a vendor who validates such information using these sources. Fannie is working on approving more.
When verifying this information, the lender no longer needs to obtain pay stubs, W-2s, tax returns, or bank statements. All they need to do is collect the data from the consumer on the application, and get the authorization for the access to The Work Number, and their financial assets from the applicant.
Once the verification information is obtained from an approved vendor it is submitted to DU for validation. If everything matches up and is considered acceptable, DU provides acknowledgment of the rep and warrant relief. Sounds like a pretty good deal for lenders who will be selling their loans to Fannie Mae.
The caveat is for Correspondents and their Originating Lenders. If the originating lender doesn’t know if the loan will be sold to Fannie they still need to do the full verification process, including the collection and careful review, of related documentation, regardless of getting any relief through DU. In the end, the loan may not be sold to Fannie. Remember Freddie does not yet accept any rep or warrant relief provided through DU.
In some cases, a Correspondent or Wholesale lender may not decide the end investor until after the loan is approved for purchase. The loans need to be acceptable to both Fannie and Freddie. So an originating lender cannot take the chance of minimizing the verification process resulting from DU rep and warrant relief.
Something to think about before spending time and money to get set up to use the approved Fannie vendors needed to get the rep and warrant relief.
If you are planning on selling all your conforming conventional loans to Fannie Mae, this is a good deal. Go ahead and do what needs to be done to get set up with approved vendors, and implement the technology needed to integrate the process with your systems and DU. If not you may want to wait…
Correspondent and Wholesale lenders may need to provide some direction to those from whom they purchase loans on how they’ll handle the process, the verification of information, and any rep and warrant relief.
Ain’t it always the way. Things just ain’t quite as simple as they’re cracked up to be.
BTW, lenders are always responsible for data integrity and accurate, timely documentation and there is never relief from the reps and warrants for fraud or misrepresentations.
Lend responsibly my friends.
