New Fannie Mae Quality Control Standards Attract Outsourcers

[Update 1: Includes Kroll Factual Data] Third-party companies are pushing new services onto the market for lenders looking to meet the new quality standards put out by Fannie Mae (FNM). Fannie released a lender letter in March detailing the policies, processes, and technology enhancements it requires from sellers in order to reduce loan repurchase risk. The new guidelines will go into effect July 1, 2010. Clayton Holdings incorporated the Fannie Mae standards into its underwriting and quality control services and will be able to help lenders do the same. Clayton is known for providing risk analysis, loss mitigation, and operational and staffing services. According to Clayton, the new requirements force lenders to create new procedures for before closing and after. One example is that lenders must now confirm ten basic data elements for every new loan before closing and perform an audit of all high-risk loans before and after loan funding. Clayton can outsource underwriting, due diligence, compliance assurance and quality control services for its clients, which include major lenders. “Meeting industry standards is always an essential part of operating in the mortgage industry, but in today’s environment having the ability to quickly react to changing regulatory demands is vital,” said Tom Donatacci, executive vice president at Clayton. Kroll Factual Data, which also provides independent verification services, also developed a set of programs to help lenders meet the new Fannie Mae requirements. According to Kroll, lenders will be required to ensure borrower liabilities are incurred up to closing and disclosed when qualifying the borrower for the loan. This requires re-verification of the borrower’s credit standing and early identification of undisclosed liabilities. “The broad scope of this new policy spans a range of verifications that, until now, had to be performed by loan processors – already under a heavy burden of new documentation requirements – or sourced by them through a complex network of providers,” said Teresa Grove, senior vice president, Kroll Factual Data. According to Kroll, loan repurchase requests to lenders increased to $30.8bn in 2009 from $7.3bn in 2008. The new Fannie guidelines will go into effect July 1, 2010. Write to Jon Prior.

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