Upside Down Mortgage

Archive for May, 2009

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Mortgage Fraud Fannie Mae

Many investors and agencies, such as Fannie Mae, Freddie Mac, and FHA, require its lenders to have an active quality control plan in place. The reasoning is that quality control will help ensure that the loans are of high quality and in compliance with laws and regulations, including the agency’s guidelines. Quality control also helps prevent unnecessary errors and fraud.

More agency guideline changes may be forthcoming in 2010, but the current quality control guidelines for Fannie Mae, Freddie Mac, and FHA are similar. We have compiled a very general summary of these guidelines, mostly in the context of single family. For complete details and rule exceptions, refer to HUD 4060.1 chapter 7, Fannie" target="_blank">www.efanniemae.com/sf/guides/ssg/sg/pdf/sg0309.pdf">Fannie Mae Single Family Selling Guide section D1, and Freddie Mac Single-Family Seller/Servicer Guide chapter 48.

Sampling

A large part of your quality control program is performing quality control reviews (audits). The general rule for Fannie Mae, Freddie Mac, and FHA is to audit a random 10% selection of your closed loan files. This 10% sampling needs to reflect an accurate representation of all your loans, which means including files from different underwriters, appraisers, etc.  In addition to this 10%, FHA also requires reviews for all loans going into early payment default.

Independence

To avoid any conflict of interest, Fannie Mae, Freddie Mac, and FHA all require the staff performing your quality control to be independent of the processes they’re reviewing (such as origination, production, underwriting, and closing). This means that if you choose to perform your quality control in-house, you should have a separate department dedicated to quality control. However, you must ensure that the staff is properly trained to perform quality control audits.

Alternatively, you can outsource your quality control audits to a third party, such as Mortgage Compliance Advisors, LLC. For some organizations, this may be more cost effective than staffing and training a separate quality control department. If you choose to outsource, HUD requires that you have a written agreement with your third party. Furthermore, you are responsible to ensure that the third party is meeting the agency guidelines.

Timeliness

Fannie Mae, Freddie Mac, and FHA want to make sure that you are frequently completing your quality control audits, as outlined in your quality control plan. The specifics vary among the agencies, but the principle of timeliness is the same.

FHA guidelines:

• Audit monthly, if closing more than 15 loans per month
• Audit quarterly, if closing 15 or fewer loans per month

Fannie Mae guidelines:

•  Audit monthly

 Freddie Mac guidelines:

• No specified time – every loan must have chance of selection for audit within 90 days of Note Date

Re-Verifications

Part of the quality control review includes re-verifying documentation. With a few exceptions, the requirements are essentially the same for Fannie Mae, Freddie Mac, and FHA. Some very general items to be re-verified include:

1. Credit report – For each loan under review, you need to order a new credit report from a different source than the original, to compare the two. For the exceptions to this rule, refer to the appropriate handbook or guide.
2. Income, employment, and asset information (such as source of funds) – This re-verified information should be compared to the original source of documentation.
3. Appraisal – For 10% of the loans selected for the QC audit, you need to perform a field review. The remaining 90% require appraisal desk reviews (except for FHA streamline refinances and HUD REO sales).
4. Underwriting decision – Make sure to review the accuracy and quality of the information used to support the lending decision.

After the Audit

Once the quality control audits for a specific period are complete, findings from the file reviews should be reported to your company’s management. Management should document and take any necessary actions to ensure compliance. After reporting to management, FHA requires you to retain your quality control reports and the follow-up for two years. For Fannie Mae and Freddie Mac, you should retain them for three years. You do not need to report to HUD, Fannie Mae, or Freddie Mac unless there is evidence of fraud or serious violations.

About the Author:

Mortgage Compliance Advisors (MCA) has the experience and resources to serve all your compliance needs, including quality control audits, consulting services, up to date lending manuals, and many other compliance services. We have grown to serve hundreds of clients nationwide because of our experience, fast turnaround time, low prices, and easy process. We require our auditors to have at least 20 years of mortgage experience, to ensure that you receive accurate and helpful advice. We will also complete your quality control audits quickly: simply drag and drop your files to our secured server, and we will return the full report in about 30 days.

For more information about quality control guidelines or to get started with quality control file audits, visit www.MortgageComplianceAdvisors.com or call 877-226-3217.

Source - Quality Control Guidelines Summarized for Fannie Mae, Freddie Mac, and FHA

Part 2 - Exposing Fannie Mae and Freddie Mac: Corruption

Loan Modification Making Home Affordable

Subprime lenders who fueled the U.S. housing crisis may be reaping benefits from the Obama administration’s Home Loan Modification program, according to a report from the Center for Public Integrity (CPI).

The $75-billion program, dubbed Making Home Affordable, grants taxpayer subsidies to lenders who successfully lower monthly payments for troubled borrowers. However, the study shows, 21 of the top 25 participating lenders were involved in subprime loans, which led to the housing collapse in the first place.

CPI executive director Bill Buzenberg says that much of the money is simply going back to the same companies that started the problem. According to the report, three of the biggest lenders - Countrywide, Wells Fargo, and JPMorgan Chase - are eligible for several billion dollars in aid under the program.

The government has recently urged lenders to crank up their home loan modification assistance programs as the Making Home Affordable plan went off to a slow start. As of last month, less than 10% of eligible borrowers have been aided by the program, according to estimates by the Treasury Department.

The CPI report went on to show that mortgage lenders and servicers have been slow in following the government’s efforts to stem foreclosures, despite “intense pressure” from the White House and the Congress. This is why, the report said, the government has resorted to incentive payments to get them to participate.

Major lenders have slammed the report, saying it undermines their real efforts to help homeowners. Scott Talbott of the Financial Services Roundtable, a group consisting of the largest U.S. lenders, says that it oversimplified the roots of the housing crisis and ignored the complexities of the real estate market.

Talbott added that lenders are doing what they can to help troubled homeowners through the Making Home Affordable program, as well as other foreclosure prevention initiatives.

To choose the best home loan modification program consult an authorized home loan modification consultant. For more news and articles on home loan modification program visit the best online Loan modification Information Resource: CDLoanMod.com

About the Author:

The Author is a Loan Modification Assistance specialist who writes on various home loan modification related topics to help people understand & choose the best Loan Modification option. For more helpful articles visit the author’s blog at http://loan-modification assistance.blogspot.com

Source - Home Loan Modification Program May Be Helping Subprime Lenders

Making Home Affordable and Avoiding Foreclosure Rescue Sc...