Fannie Mae announces sweeping program for mortgage lender “freedom” from penalties

Using Fannie Mae tools for underwriting, appraisals shields lenders from buybacks

Fannie Mae announced that lenders using its Desktop Underwriter and Collateral Underwriter tools will be shielded from buyback risk from the GSE under certain conditions. Fannie Mae's "Day 1 Certainty" program helps lenders address risk up front in underwriting and property appraisal and inspection so that they can lend with confidence, Timothy Mayopoulos, president and CEO of Fannie Mae, said at the Mortgage Bankers Association conference today. 

“Day 1 Certainty is a major step forward in helping our customers transform the mortgage origination process,” Mayopoulos said. “Ultimately, we want our customers to have the confidence to lend, so that more qualified borrowers have access to affordable mortgage credit.

These tools have been available for some time, so why offer lenders these waivers now?

Andrew Bon Salle, executive vice president of single-family business at Fannie Mae, said the timing was right for this program because of the technology available, but also because of a shift at Fannie Mae.

"Advancements in technology have enabled these capabilities — we couldn’t have done this several years ago, but we've also shifted our focus and strategy at Fannie Mae to providing a simple and certain customer experience. Before we were focused on helping borrowers impacted by the crisis to stay in their  homes, but now we can turn our attention to helping industry move forward, and this is a huge step in doing that," Bon Salle said.

Fannie Mae outlined the Day 1 Certainty process, which is contingent on lenders using these tools:

Desktop Underwriter Validation Services for Income, Assets, and Employment:

  • Provides Fannie Mae customers with tools to reduce risk and improve the experience they provide to borrowers in the primary market. DU validation services give lenders certainty on Day 1 that they will receive freedom from representations and warranties for income, assets, and employment information validated through DU.
  • Validates the loan application data up-front and gives lenders faster and easier verification of key loan data components.  
  • Income validation is available today. Asset and employment validation will be available on December 10, 2016. 

Collateral Underwriter for Greater Certainty:

  • When a property receives a qualifying score through Collateral Underwriter, customers can be certain they will receive representation and warranty relief for the appraised value of the property.
  • Enables lenders to focus more of their attention on high-risk appraisals. It also makes the process more efficient for appraisers due to fewer underwriter requests for correction and clarification.
  • Collateral Underwriter freedom from representation and warranty for appraised value starts on December 10, 2016.

Enhanced Property Inspection Waiver:

  • Offers customers, who use Desktop Underwriter, eligibility for a waiver of Fannie Mae’s property inspection requirement for many refinance transactions. When a waiver offer is issued and accepted by the lender, they have Day 1 Certainty that they will receive representation and warranty relief on property value, condition, and marketability.
  • Shortens the origination process and reduces loan origination costs making it easier for lenders to do business and making the process easier for borrowers.
  • Enhanced Property Inspection Waiver for all lenders starts December 10, 2016.

"Our Day 1 Certainty program makes the mortgage process faster, better, and more efficient, and it gives lenders confidence to lend, so that they are not worrying that at some point in the future the quality of this loan is not there," Bon Salle said. 

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