A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties (08/07/2024)

Fannie Mae grants a limited waiver of certain underwriting representations and warranties to a lender that sells an eligible mortgage that is underwritten with DU.

If DU returns an Approve/Eligible recommendation on the final submission of the loan casefile to DU, then Fannie Mae will not require the lender to represent and warrant that the mortgage loan complies with the requirements of this Guide with regard to the mortgage loan’s eligibility for delivery to Fannie Mae and the borrower’s creditworthiness, provided that:

• All data pertaining to the mortgage loan is complete, accurate, and not fraudulent, and all data on which the underwriting recommendation was based reflects the final terms of the closed mortgage loan, and otherwise comply with the requirements relating to submissions and resubmissions as stated in this Guide and any relevant supplemental materials.

• All data on which DU’s recommendation is based complies with Fannie Mae’s verification requirements and the mortgage loan file is documented accordingly.

• The lender uses the appropriate special feature codes, as specified in the delivery reporting requirements of this Guide or elsewhere in the Lender Contract. SFC 127 is required for all loans underwritten through DU.

• All Verification Messages/Approval Conditions that appear in the DU Underwriting Findings report with respect to the related mortgage loan application must be satisfactorily resolved, and the mortgage loan file documented accordingly.

• All other requirements, instructions, and restrictions set forth in this Guide and any release notes are complied with by the lender (or DU licensee).

• The lender reports the proper DU-assigned unique loan casefile ID at the time of delivery on the appropriate loan schedule or schedule of mortgages. (A DU loan casefile ID is unique to an individual mortgage loan. The same casefile ID may not be used to underwrite more than one mortgage loan to DU.)

• The lender pays all applicable loan-level price adjustments.

The foregoing waiver of underwriting representations and warranties does not apply to:

• loans that receive an Out of Scope recommendation, even if the underwriter believes that the mortgage should be approved;

• loans that receive an Approve/Ineligible or Refer with Caution recommendation; and

• the product eligibility representations and warranties in Ability to Repay Loan Eligibility Requirements (see B2-1.5-02, Loan EligibilityB2-1.5-02, Loan Eligibility);

• the eligibility and underwriting representations and warranties that apply to the property, including, but not limited to, condition, value, or marketability of the property;

• appraisal or alternative property inspection as set forth in this Guide;

• government loans that are underwritten with DU; and

• seasoned loans, as defined in this Guide.

  Note: All seasoned loans that are delivered to Fannie Mae, including those that received an Approve/Eligible recommendation from DU, must meet Fannie Mae’s seasoned mortgage requirements as set forth in B2-1.5-02, Loan EligibilityB2-1.5-02, Loan Eligibility.

All other representations and warranties that are part of the Lender Contract shall apply. The use of DU does not relieve the lender of any obligation set forth in the Lender Contract, except as expressly set forth:

• in this section with respect to Fannie Mae’s limited waiver of representations and warranties; and

• in any DU recommendation or findings relating to documentation requirements, property valuation requirements, and any other similar requirements provided by DU, unless such requirements are modified by B3-2, Desktop Underwriter (DU) B3-2, Desktop Underwriter (DU), of this Guide or the lender’s applicable DU license agreements.

The table below details enforcement relief for mortgages with data calculated by approved vendor tools.

In all cases, the lender must continue to comply with all DU messages, including documentation and determination that age of documentation requirements are met, and determine the eligibility of the self-employment income being used to qualify.

See B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed BorrowerB3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower for information on using other approved vendors.

In addition to the limited waiver of representations and warranties described above, Approve/Eligible loans for which DU validated a loan component may also benefit from certain representation and warranty enforcement relief. The table below describes the validated component, the related enforcement relief, and other details.

The lender must comply with the following additional requirements in order for the representation and warranty enforcement relief to apply:

• All of the requirements that pertain to the DU validation service must be met.

• All Verification Messages and Approval Conditions that appear in the DU Underwriting Findings report, including any related to the DU validation service, must be satisfactorily resolved and documented accordingly.

• The loan must close by the "Close by Date" stated in the DU message.

If there is information that is conflicting with or contradictory to the data that was submitted to DU, the lender must perform due diligence to investigate and ensure that accurate data is entered into DU. Enforcement relief will not apply, regardless of DU’s issuance of validation messages, if the lender’s investigation of conflicting or contradictory information contained in the loan file or within the verification report would have impacted the information entered by the lender in DU.

For more information on the DU validation service, see B3-2-02, DU Validation ServiceB3-2-02, DU Validation Service.

Income Calculator  is an optional tool to assist lenders in calculating certain income types. Income Calculator performs a complete analysis of a borrower's qualifying income (for eligible income types) and produces a Findings Report.  If lenders comply with the following requirements, they will receive representation and warranty enforcement relief for the accuracy of the income calculation, on an income-source basis, on loans with income calculated by Income Calculator.

• All information submitted to Income Calculator must be accurate and complete.
• A copy of the Findings Report must be kept in the loan file.
• The amount of income used for qualifying cannot be more than the amount calculated by the tool.

Lenders must continue to comply with all other Selling Guide requirements, including DU messages, as applicable.

See  B3-3.1-10, Income CalculatorB3-3.1-10, Income Calculator for additional requirements and technology servicer provider information.

In addition to the limited waiver and enforcement relief of representations and warranties described above, loans may also benefit from waivers or enforcement relief of certain representations and warranties related to the appraisal and value of the subject property. See A2-2-06, Representations and Warranties on Property ValueA2-2-06, Representations and Warranties on Property Value, for more information.