Some Mortgage Lenders May Need to Act Now on New Fannie Mae Requirements


BLOG VIEW: In December, Fannie Mae announced significant changes to its Approved Seller/Servicer requirements where, starting in 2023, Sellers must sell a minimum of 12 loans to Fannie Mae and Servicers must service one loan in order to maintain eligibility.

As a result of these changes, certain mortgage lenders face an important decision that they need to make immediately.

Many lenders have gone through the approval process and yet, for a variety of reasons, have a current business model that does not include selling directly to Fannie Mae and thus are in “Inactive Status.” Lenders that fall into this category need to evaluate and adapt their business models in order to meet Fannie Mae’s requirements.

Whether they are a portfolio lender or one that is selling loans on a servicing released basis, maintaining Fannie Mae approval is likely critical to these lenders’ business models – it impacts how they do business and is very relevant to their external business partners.

One of the guaranteed questions that business partners will ask is: “Is your firm approved as a seller/servicer with Fannie Mae?”

So, how can a lender answer this question if it has been “terminated?”

Business model ramifications can have a “trickle-down” effect that impacts technology, operational effectiveness, and capital market options. An example is a key point mentioned in the Selling Guide Announcement (SEL-2022) and the Guide that speaks to Fannie Mae’s position of allowing Approved Seller/Servicers to maintain access to technology.

Losing the seller/servicer approval status impacts the access to technology such as DU and will result in drastic changes to business processes. Fannie Mae further outlines if a lender is no longer an approved seller/servicer, access to all technology will be turned off within 60 days.

The impact from this one example will result in important cycle times from loan application to close, market reputation for customer service, loan program determination, interfaces with loan origination system (LOS) systems, and other databases that are dependent upon the LOS.

The outcome for not having an aggressive plan of action now and addressing where a lender fits in meeting Fannie Mae’s requirements and deadlines will result in termination of the very valued Seller/Servicer Status. Our firm advocates that lenders evaluate the importance of having earned approval as a Seller/Servicer from Fannie Mae and act now. 

Returning to an active seller/servicer status involves not only working direct sales to Fannie Mae into a lender’s business model, it requires an immediate systematic review of what changes need to be put in place. Lenders should not fall short on their timeline to submit all documentation to meet Fannie Mae requirements.

Each lender will need to demonstrate it can meet all of Fannie Mae requirements long before the end of this year. Remember that the loan sale and servicing requirements are for activity that occurs by the end of 2023.

Lenders can expect that basic Impact areas will include policies, procedures, infrastructure, governance standards, financial capability, capital markets and loan servicing.

Luana Slettedahl is a principal consultant with BlackFin Group, in the firm’s mortgage strategy practice. She has 40 years of diversified experience in capital markets, mortgage servicing rights, GSE and Ginnie Mae relationship management and seller/servicer requirements.

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