LOAN QUALITY INITIATIVE
New Regulations!
Fannie Mae has implemented new quality control standards
Fannie Mae purchases loans from banks to provide the liquidity that allows banks to continue writing new mortgages. With foreclosures at all-time highs, Fannie Mae is now requiring more stringent 'loan quality' standards from lenders and their borrowers before purchasing these loans.
As a consumer, these rules affect the way banks underwrite new loans. It can also derail the process of getting a mortgage if there are inconsistencies in your credit report or other financial history.
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At EMM Loans, we're dedicated to your success in obtaining the best loan possible. The Loan Quality Initiative is a program designed to protect Fannie Mae from fraud and loan defaults. The following is a letter sent to lenders as an explanation of the program:
LENDER LETTER LL-2010-03
Historically, many issues related to compliance with Fannie Mae selling policies are not detected until after loans are delinquent or through the foreclosure process. Loan repurchase requests to lenders have increased in the past three years, highlighting the need for an improved approach for working with lenders to deliver loans that meet Fannie Mae’s underwriting and eligibility guidelines. Fannie Mae conducted an extensive analysis to determine the primary drivers of repurchase requests and is launching the Loan Quality Initiative (LQI) to identify and implement policy, process, and technology enhancements to improve the compliance with underwriting and eligibility guidelines and mitigate repurchase risk.
Working with its lender partners, Fannie Mae will implement the LQI enhancements to promote improved loan delivery data that is complete, accurate, and fully reflective of the terms of the mortgage. The LQI will also help ensure that the loan meets the credit and eligibility standards, pricing guidelines, and other requirements of the Selling Guide or negotiated variances. A primary focus is on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery.
This updated approach is designed to stand the test of time across market cycles and risk tolerances, thus supporting market stability and reducing investor and lender risk. Changes introduced under the LQI are intended to reduce repurchase requests through improved data integrity and consistent and early feedback on policy compliance while maintaining the current business model of relying on lenders to make appropriate decisions in accordance with Fannie Mae’s guidelines.
