D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit (08/07/2019)

Although Fannie Mae does not specify an exact format for reports, the lender must design reports that are useful to management for evaluating and monitoring the quality of the lender’s mortgage loan production. The management reports must cover QC results at a high level by focusing on defects and broad trends that are revealed by the review process, as well as identifying mortgage loans or items that need specific corrective action.

Reporting needs are unique to each lender; however, at a minimum, post-closing QC reports must be produced monthly and

• reflect the final defect rate for the results of the current review period (taking into account responses and resolution of the initial QC findings);

• include trending information (issues and top defects);

• distinguish between defects related to compliance with federal, state, or local laws and regulations and underwriting and eligibility defects;

• report on each type of review (random and discretionary) and provide results using consistent methodology and terminology across review types;

• include intended corrective actions; and

• summarize the results of each individual review type into a comprehensive, summary report of all QC findings.

The lender must notify Fannie Mae within 30 days of confirmation that one or more defects identified through the QC file review process results in the loan being ineligible as delivered to Fannie Mae. Notification must be made using the self-report functionality in Loan Quality Connect.

When making the self-report to Fannie Mae, the lender must provide Fannie Mae with a report of its findings and copies of the relevant documentation that support the reason for the finding. For example, if tax return transcripts reveal that qualifying income was inaccurate such that the borrower was not qualified for the loan on the terms and pricing offered, the lender should provide copies of the original income documentation and the tax return transcripts with its notification to Fannie Mae.

For information on the lender’s responsibility to self-report any misrepresentation, fraud, or other possible breach of a selling warranty or compliance with laws, see A2-2-01, Representations and Warranties OverviewA2-2-01, Representations and Warranties Overview, A3-2-01, Compliance With LawsA3-2-01, Compliance With Laws, and A3-4-03, Preventing, Detecting, and Reporting Mortgage FraudA3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud.

The lender must retain all written and electronic records that are created as part of a QC review process for a minimum of three years. These records include documentation of QC reports, QC review findings, successful rebuttal documentation, as well as documentation related to any corrective actions. The lenders must provide Fannie Mae with a copy of its records upon request.

The lender must have an independent audit process to ensure that its QC process and procedures are followed by the QC staff, and that assessments and conclusions are recorded and consistently applied. The findings must be accurately recorded and consistent with the defects noted in the lender’s system of record.

Results of the QC audit must be distributed to senior management. It must include an affirmative statement that no influence from other business units or bias in the QC conclusions was apparent. Management must distribute the results to the appropriate areas within the organization and an action plan must be established for remediation or changes to policies or processes, if appropriate. The lender must provide a copy of the QC audits and the audit of the QC process to Fannie Mae upon request.