Fannie Mae recently published its Loan Quality Initiative (LQI), impacting several requirements. Below is MCA’s brief summary of Fannie Mae’s LQI, including effective dates. We hope you find the information informative and useful.
If you aren’t sure whether your current Quality Control Plan meets Fannie Mae’s new requirements, MCA can help. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com for more information.
You can also find more detailed information about Fannie Mae’s LQI at www.efanniemae.com/sf/lqi/index.jsp.
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Fannie Mae Loan Quality Initiative (LQI)
Borrower Identity Verification
Lenders will be required to confirm the identity of each borrower prior to the extension of credit.
Effective: June 1, 2010
SSN and ITIN Verification
All borrowers must have a valid SSN or ITIN. Lenders must validate the SSN with the Social Security Administration.
Effective: June 1, 2010
Borrower Occupancy
Under certain circumstances (as addressed by the DU findings), the borrower must provide additional documentation (gas bill, phone bill, etc.) confirming the borrowers intent to occupy.
Effective: April 17, 2010
Validation of Qualified Parties
Lenders are required to run GSA and LDP on any company or individual involved in originating, underwriting, or servicing.
Effective: June 1, 2010
Undisclosed Liabilities
Lenders must determine all borrower liabilities incurred prior to and during the loan process. Fannie Mae recommends a new or updated credit report prior to closing. If additional liabilities are discovered they must be listed on the final 1003 (and be re-run with DU if needed)
Effective: June 1, 2010
Minimum Credit Score
Loans will be rejected for credit score less than 620.
Effective: July 26, 2010
Property Unit Number
If the subject property is a property type identified by a unit number, the unit number must be included in the property address on the note.
Effective: June 1, 2010
Calculating LTV Ratio
LTV ratios will be shortened to a two decimal places, then rounded up to the next whole percent.
Example:
- 96.01% is now 97%
- 96.001% is now 96%
Effective: January 3, 2011
Manual Underwriting of DU Refer with Caution Loans
Lenders must deliver all RWIC manually underwritten loans as manually underwritten and not a DU underwritten loan.
Effective: March 2, 2010
Lender Quality Control Updates (Part of the LQI)
All effective July 1, 2010
Lender Accountability for TPO
Must have written procedures for the approval of TPO and include the review of specific documents. Lenders must also conduct quarterly loan performance reviews.
Lender QC Process and QC Plan Contents
Lenders are expected to develop and maintain a QC program that meets Fannie Mae updated requirements.
Outsourcing of the QC Process
Lenders must establish a process to review the Outsourcing company’s work. Lenders must also address the findings identified in the QC contractor’s loan reviews.
Lender Prefunding QC Review Process
Lenders’ QC plans are required to include a prefunding review process.
Post-Closing QC Timing and Loan Sampling
QC loan selections must be made within 30 days of closing, and review must be completed within 60 days of selection (previously 90 days). Lenders must notify Fannie Mae if their QC cycle is behind by more than 30 days.
Lender Post-Closing QC Review Process and Data Integrity
Lenders are required to establish a policy to attempt to verify owner-occupancy. (Discussed earlier.)
Reporting QC Review and Audit Review of the QC Process
Results from the Lender’s QC audits/reviews must be reported to Senior Management within 30 days after the completed review/audit.
More detailed information can be found at www.efanniemae.com/sf/lqi/index.jsp.
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