Fannie and Freddie previously announced programs for lenders to obtain some relief from their reps and warrants for quality loans. Fannie recently expanded such access to relief under their new Day 1 Certainty program. (D1C)
Under D1C, a lender may get complete relief from the normal required reps and warrants associated with employment, income, and/or asset information/documentation.
There are some caveats. But for the most part, when a lender properly validates these loan components and the information used is accurate, relief is provided. Oh, what a relief it is…
With D1C relief, the lender is no longer exposed to fines, indemnifications, or repurchases associated with the component on which the relief was obtained, EXCEPT where there is fraud or misrepresentation, regardless of whether the lender was aware or involved. When there is fraud, all bets are off.
Why do I bring the up? Aside from the obvious (you shouldn’t commit fraud), according to the most recent CoreLogic National Mortgage Application Fraud Risk Index, fraud is once again on the rise.
Credit has tightened, rates have risen, and loans are a little harder to come by. So, we see fraud rear its ugly head.
It’s important that you make sure that your LO’s, their sources, and your applicants are all playing by the rules. No one is skirting the issues or taking shortcuts to quality.
There’s only one way to do a mortgage and that’s by the book. Otherwise, you may be in for a big surprise.
BTW, as I may have said once, and will surely say again, compliance is just as important as quality. A lender can also forfeit any rep and warrant relief due to a failure to originate and close a loan in strict compliance with all of the governing laws.
This ain’t horseshoes. Close isn’t good enough. You need a ringer every time. Otherwise, you may be relieved of any rep and warrant relief.
Stay compliant my friends.