Fannie Mae Giving Lenders Rep And Warranty Relief Via DU Validation


In a move that could have broader implications for the housing finance industry, government-sponsored enterprise Fannie Mae has introduced Day 1 Certainty, a new initiative to provide its lender clients with freedom from representations and warranties on key aspects of the mortgage origination process.

Starting immediately, lenders that use Fannie Mae’s Desktop Underwriter (DU) automated underwriting tool will get rep and warranty relief on automated income verification.

“Starting right now, today, we’re providing that freedom,” said Timothy J. Mayopoulos, president and CEO of Fannie Mae, during the Mortgage Bankers Association’s 2016 Annual Conference and Expo in Boston. “If you validate income through Desktop Underwriter, you can be certain from Day 1 that we will not ask you to repurchase a loan because the income calculation was incorrect.

“But we’re going further than that,” Mayopoulos continued. “Starting on Dec. 10, validation services for assets and employment status will also deliver freedom from reps and warrants, as well.”

In a related development, FormFree Holdings Corp., a provider of automated verification software, announced that it is the first “designated vendor” for asset verification through the Fannie Mae DU Validation Service, a component of the Day 1 Certainty initiative.

“We’re providing these tools to you, as your secondary marketing partner, but our ultimate goal is to give you the ability to reimagine and improve the experience you provide to your borrowers in the primary market,” Mayopoulos told the crowd of mortgage bankers on Monday.

Also starting on Dec. 10, Fannie Mae will be offering Day 1 Certainty on appraisals that are run through its new Collateral Underwriter tool.

“You’ll be able to leverage the power of Collateral Underwriter … to gain freedom from reps and warrants on the appraised value of a property,” Mayopoulos said. “This will be a huge benefit for lenders, and frankly, it will reduce risk throughout the entire system.”

In addition, Fannie Mae is making it easier for borrowers to get property inspection waivers for certain kinds of refinances.

“So, when you accept a waiver, you can be certain on Day 1 that we will not come back to you and ask you to repurchase that loan due to the value or the condition of the property,” Mayopoulos said.

Mayopoulos added that this could have “broader implications for the entire housing industry.”

“We believe that it is possible to bring an end to the reps and warrants framework that exists today,” he said. “We believe it is possible to achieve Day 1 Certainty in real time across a fully digitized mortgage process.”

In addition to giving lenders peace of mind that they won’t be subject to loan buybacks, provided they use Fannie’s automated underwriting tools, Mayopoulos said the other objective is to continue to streamline the mortgage process using automation. This, in turn, will help reduce operating costs for lenders.

“We’re focused on delivering a faster, simpler and more certain customer experience,” he said. “This Day 1 Certainty is a huge step forward for the mortgage origination process.”

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