We want to thank everyone who attended our webinar “Understanding How the LQI Affects You.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.


Question 1 - Is it the TPO that runs the LDP for all parties at the origination level?

• Answer – This would be a decision your investor would make. However, we recommend you run these checks prior to underwriting to ensure there are no problems prior to underwriting. These are also free to run, so cost should not be an issue.

Question 2 – Are company names required to be checked against the LDP/GSA lists? This information indicates “individuals” only.

• Answer – Fannie Mae states all “parties to a mortgage transaction include companies or individuals that are involved in the origination, underwriting, or servicing of a mortgage.”

Question 3 – Are underwriters to be listed on the GSA/LDP lists?

• Answer – Yes. See answer above.

Question 4 – Do we have to check the exclusionary lists post-close QC or is prior to close enough?

• Answer – You will only need to check the exclusionary list prior to closing. A review during post closing is not required.

Question 5 – Is the Prefunding QC required for lenders who do not service loans?

• Answer – Yes. Prefunding QC is now required for all Fannie Mae approved lenders.

Mortgage Compliance Advisors offers a free webinar every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.

(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

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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