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Mortgage

Fannie Mae releases new policies for originations during government shutdown

How to originate loans for government employees

Mortgage giant Fannie Mae released guidance Wednesday with new policies on how lenders can originate mortgages during the government shutdown.

The government partially shut down after Congress and the president failed to pass a new funding bill before the holidays, and now, 12 days later, that shutdown continues.

Before leaving for the holidays, Congress did not pass a spending bill that included the president’s requested $5 billion in funding for a border wall, and President Donald Trump refused to sign any bill that did not include that funding.

“We are providing temporary guidance on selling and servicing policies that may be impacted by the federal government shutdown that occurred on December 22, 2018,” Fannie Mae said in a letter to lenders. “This guidance assumes that the shutdown will be temporary in nature.”

“These temporary policies are effective immediately, and will automatically expire when the federal government resumes full operations,” the letter continued. “If the shutdown lasts for a prolonged period, we may provide additional guidance.”

Fannie Mae explained that the government shutdown does not mean borrowers employed by the government are ineligible for mortgages during the shutdown. In fact, its Selling Guide provides for these employment policies:

  • If the lender is unable to obtain a verbal verification of employment during the shutdown, the Selling Guide already permits the lender to obtain the verbal VOE after loan closing, up to the time of loan delivery. If the verbal VOE cannot be obtained prior to delivery, the loan is ineligible for sale to us
  • For borrowers in the military, the Selling Guide currently allows for a Leave and Earnings Statement dated within 30 calendar days (or 31 days for longer months) prior to the note date in lieu of a verbal VOE.
  • If a borrower is furloughed on or after closing of the mortgage loan due to the shutdown, the loan remains eligible for sale, provided the lender has been able to obtain all required documentation (for example, paystubs, IRS W2s, verbal VOEs) prior to delivery of the loan.
  • If employment has been validated by the Desktop Underwriter validation service, the validation will remain eligible for representation and warranty relief on employment provided the lender complies with the “close by” date in the DU message. Otherwise, the standard guidance provided above related to obtaining a VOE would apply.

Fannie Mae also explained that in some cases it requires document verification through a government agency such as the Internal Revenue Service or the Social Security Administration. Because the shutdown may prevent these requests from being processed, the GSE released new temporary policies for the two agencies.

IRS Transcripts: We require lenders to have each borrower (regardless of income source) complete and sign a separate IRS Request for Transcript of Tax Return at or before closing, except when all of a borrower’s income has been validated by the DU validation service. We do not require lenders to obtain tax transcripts from the IRS prior to closing, but do require that it be included as part of the lender’s post-closing quality control processes (unless all borrower income has been validated through the DU validation service). As part of the DU validation service, DU can validate certain income types using tax transcript data obtained from an eligible verification report. As a result of the shutdown, requests for those verification reports may not be fulfilled with the IRS and may remain in pending status until normal operations resume. DU will continue to return validation messages for tax transcript verification reports received before the shutdown, but will not be able to access any new verification reports for validation.

Social Security Number Validation: When data integrity issues pertaining to the borrower’s Social Security number are identified, a lender may be required to validate the Social Security number with the SSA using SSA-89. Because these requests may not be processed during the shutdown, Fannie Mae is temporarily revising this policy to enable lenders to obtain the verification prior to delivery of the loan. If the Social Security number cannot be validated prior to delivery, the loan is not eligible for sale to Fannie Mae.

Click here to read the full letter.

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