Guest Blog: Brady Meadows
On October 24th Fannie Mae announced their Day 1 Certainty program. Fannie Mae has integrated DU Validation into their DU system with vendors to validate income, employment, and assets. Lenders who chose to use the DU Validation service will get day one rep and warrant relief when it comes these validations.
While the day 1 rep and warrant is the biggest benefit to clients, there are some post close QC benefits as well. Borrowers whose income, employment and assets are validated via the DU Validation system do not need to again be revalidated in the post close QC process. This will benefit lenders by negating additional processing fees to obtain these reverifications during the post close QC process. Additional cost savings will be had as lenders using the DU Validation services are not required to have their auditors spend time recalculating income or assets.
The devil is always in the details and this will be the case also. Currently, the post close QC process revalidates all income, assets and employment for all borrowers. Now, QC auditors will need to analyze the DU in further detail and determine which borrower's income, employment and assets were validated via the DU validations service. Not all borrowers will be able to be validated via the DU service. It's common to have multiple borrowers on the same loan not able to have their employment be validated via The Work Number. Additionally, borrowers with multiple jobs may not have all jobs validated via the new DU service. So it's possible to have a loan where only one of many borrowers employment on the loan has been given the Day 1 Certainty.
Lenders are still held responsible to ensure the information used in the DU Validation is accurate. While question 38 of the DU Validations service does state you are not required to recalculate income or assets as part of post close QC, it still may be a good best practice. For instance, if a borrower’s paystub shows a payment this will likely not be analyzed by DU. The lender would need to note this liability and adjust the income accordingly. The point here is that while a lender may use the DU validation service, the entire file may not be given the Day 1 certainty. Fannie also mentions in question 21 of the FAQ’s lenders will also need to review The Work Number report to ensure the income is being reported correctly. So while Fannie is now not requiring the recalculation of income and assets in the post close QC process, it may still be a good idea to keep this practice.
Day 1 Certainty is a good release for Fannie Mae. It’s also a good direction for the industry to seek alternatives to the current way in which we validate borrower information. As with most first steps, the Day 1 Certainty will take some time to learn the nuances and learn the true benefits of the new offering.