3
0
Just announced March 1st, the timeframe for completion and reporting of post close QC reviews to Fannie Mae is being reduced to 90 days from 120 days. As well, Fannie Mae is now requiring lenders complete a minimum number of prefunding reviews monthly. The total number of loans to be reviewed must equal the lesser of 10% of the prior month’s total number of closings, or 750 loans. Both full file reviews and component reviews count toward a lender’s minimum requirement.
The goal of this change is for lenders to gain insight on their loan quality sooner. Consider how you can adjust your loan manufacturing process to ensure you are in compliance with Fannie Mae’s Seller requirements. These updates will be required for implementation by 9/1/23.
As a QC technology and services vendor, you might think we would grouse at this change. But, quite the contrary, we applaud Fannie Mae for requiring lenders to find defects quickly. Changes you make to your origination processes can nip quality issues in the bud and reduce pipeline impacts.
We will be communicating to all our audit services clients the changes we will be implementing. But additionally, we thought we’d share some thoughts on the subject that might help any lender get prepared.
First, whether you outsource QC or have an internal audit staff performs your reviews, remember this is a group effort. Your vendor and/or internal staff perform part of the process, but other “areas of responsibility” have roles to play. All can impact timelines and final delivery of QC reporting to Fannie Mae. Timely response for the collection of missing documents and clearing conditions in the rebuttal process should be tightly controlled.
Tell me once, tell me twice, tell me a third time is a good recipe to keep people on task. This applies to any process that relies on coordination of responses to meet timelines. Consider how often you need to follow-up to ensure timely responses.
Second, evaluate your end-to-end quality control procedures to identify the areas where you want tight control of productivity, or service level agreements in the case of QC vendors. Consider how well your technologies and/or services can verify and validate loan file data. If this part of your process is not being done both efficiently and effectively, costs will rise and downstream automation is at risk.
Machine learning technology has advanced document classification accuracy, but does your process also include data extraction programs that are tracked for accuracy? Your QC technology ecosystem must include both to ensure accurate data is driving more and more automation. This can also help you achieve consistent loans per person per day metrics you can rely upon.
Finally, with these new Fannie Mae requirements think about how you might also want to adjust your action plans to deal with potential weaknesses in your origination process. Does your QC technology have robust reporting and report building capabilities to drill down on the root cause of issues? All the work being put into quality control reviews can be highly rewarded if you can gain continuous insights to lower defects.
These Fannie Mae requirements may put a slight wrinkle in your current QC procedures but will most likely enable a wiser and more mature loan quality management process. The timeline for implementation is September 1, 2023, but there is no time like the present to start!
