Fannie Mae is preparing to offer immediate representation and warranty relief to lenders that use its suite of automated quality-assurance technology.
The benefit will be unveiled as part of a marketing campaign dubbed "Day 1 Certainty." That name will serve as an umbrella brand for a variety of Fannie Mae tools, including Desktop Underwriter, Collateral Underwriter and EarlyCheck, according to sources familiar with the initiative.
The government-sponsored enterprise filed applications to register the service marks "Day 1 Certainty" and "Day One Certainty" with the U.S. Patent and Trademark Office in July. The filings describe "desktop computer software in the field of mortgages, namely, for use in providing a waiver or an end to a representation or warranty obligation in an electronic mortgage loan system."
In addition, the website domains Day1Certainty.com and DayOneCertainty.com were registered this month by advertising agency Bloomfield Knoble. The Dallas firm's
The circumstances under which representation and warranty waivers will be granted are not completely clear. Some aspects of the loan file that lenders currently warranty may be eligible for immediate waivers, while others may not.
The Federal Housing Finance Agency is said to have approved the plan only this week, and an official announcement is expected next week during the Mortgage Bankers Association's Annual Convention in Boston. Representatives from Fannie Mae and the FHFA declined requests for comment.
The plan would go a long way toward alleviating concerns about repurchase risk and encourage lenders to remove
To be sure, repurchase requests at Fannie and Freddie Mac have dropped significantly since they peaked in 2012, as delinquencies rates have decreased and the GSEs implemented new policies to limit lenders' liabilities.
For example, the GSEs created a
Yet Fannie may have felt like more reassurances were needed to encourage mortgage lenders not to be overly cautious in credit decisions.
Lenders can obtain insurance for repurchases on the private market, and coverage is typically contingent on all of a lender's loans undergoing quality reviews, said Justin Vedder, executive vice president at CastleLine Risk and Insurance Services. While not familiar with the Fannie's plans, Vedder speculated that it would be difficult to provide blanket coverage in return for use of quality control tools.
"It's difficult to assess a file quickly," said Vedder. "There are some things in the origination process that are black and white, but some things are gray."
Over the past few years, Fannie and Freddie Mac have been updating existing technologies and integrating them with new tools for lenders to validate loan data and eligibility prior to closing and sale to investors. Desktop Underwriter, Fannie's automated underwriting system, was made
The tools rely in part on technology and data developed through the Uniform Mortgage Data Program, a joint initiative by Fannie Mae and Freddie Mac to institute a variety of loan data and collection standards. Currently, there are UMDP datasets for appraisal and loan delivery requirements, and new datasets are in development for the
The technologies are free for lenders to use, but the GSEs have so far not required lenders to use them. Freddie has already
Lenders have begun using the tools in hopes they would improve the loan sales process, and they wouldn't mind getting some rep and warrant relief as well.
"We have just started using some tools but anticipate that as we work them into the loan manufacturing process we will see an efficiency lift in the underwriting flow," said Alice Carmack, executive vice president of credit risk at Bay Area lender First Cal. "We would love for them to do more."