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What Mortgage Lenders Need to Know about the Updated Collateral Analysis Requirement 

With sophisticated mortgage technology tools and a wide range of easily accessible data available, reverifying the accuracy of a property appraisal can be done effectively from a desk. It’s a digital reality that Fannie Mae and Freddie Mac turned into policy in May, when they updated the collateral analysis requirement and eliminated the need for field reviews in most circumstances.

For mortgage lenders, it can be difficult to wrap your head around this change in guidelines. You’re likely asking yourself a ton of questions, such as…

What does this mean for my organization? Does this update benefit me? How am I supposed to ensure compliance with respect to property valuation reviews?

Continue reading to uncover answers to all of these questions and more.

What the Updated Requirement Entails

In the past, lenders were required to obtain field reviews on 10% of loans selected for post-close quality control reviews. Now, under Fannie Mae and Freddie Mac’s enhanced policies, which were released on May 5, 2021, field reviews are no longer required in most cases. The agencies have replaced the previous requirement, which demanded the completion of field reviews, with a new collateral risk assessment requirement that can be easily met with standardized data and third-party tools. The requirement states that lenders must complete a collateral risk assessment of all mortgage loans with an appraisal as part of the random QC sample.

Both Fannie Mae and Freddie Mac are not requiring lenders to have licensed professionals or certified appraisers complete the collateral risk assessments. However, they have published qualifications that the collateral risk assessor must meet. The assessor must be competent in appraisal theory and qualified to address the appropriateness of the data, as well as comparable sales in the report. You can find Fannie Mae and Freddie Mac’s full list of qualifications in their respective selling guides accessible through the following links: Selling Guide and Seller/Servicer Guide.

When a Field Review is Still Obligatory

As previously stated, field reviews are not required in most circumstances with Fannie Mae and Freddie Mac’s new guidelines. There are still some circumstances in which lenders are required to obtain field reviews in order to comply with the agencies’ standards. These circumstances include:

  • If the lender is unable to complete an adequate assessment
  • If the lender is unable to determine the accuracy and quality of the origination appraisal
  • If the lender is unable to meet any of the agencies’ selling guide requirements

How to Ensure Compliance

The updated collateral analysis requirement provides an opportunity for a faster, more accurate, and an overall less expensive post-close audit process that ensures full compliance with agency QC mandates. Under the new policy, mortgage QC partners are able to efficiently verify the quality of your loans and save you money simultaneously.

At MetaSource, we have established a new Collateral Risk Analysis service under our Verifications Services that does just that. As a part of our new process as directed by Fannie and Freddie, we provide an assessment of the entire loan sample, as opposed to field reviews on only 10% of the sample unless there is an appraisal waiver provided. The results include more accurate audits, enhanced protection against non-compliance and cost savings of up to 30% on average, depending on volumes.

Our Collateral Risk Analysis was built to ensure that lenders like you meet compliance standards under the agencies’ updated post-closing QC review guidelines. It includes:

  • Actionable rating conclusion
  • GSE checklist
  • Summary of red flags
  • Enhanced quality control process
  • New interactive automated valuation model (AVM) tool

Who to Turn to for QC Assistance

At MetaSource, we have decades of industry experience, state-of-the-art mortgage workflow and compliance platforms and deep expertise in the intricacies of both pre-fund and post-close QC

When you outsource your mortgage QC audit process to MetaSource, you get an entire team working for you, with cutting-edge automation that puts you in position to leave your competition – and your compliance worries – behind. Give us a call or click on the link below to learn more about MetaSource’s mortgage QC services.

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