The lender must maintain and implement a written prefunding QC plan that outlines requirements for reviewing a sample of its loans prior to closing or, in the case of loans acquired from a delegated third party, prior to acquisition. The lender must have documented procedures that include, at a minimum, the following elements:
- timing of the prefunding QC reviews,
- loan selection process,
- verification of data and documents, and
- reporting.
The lender’s prefunding QC process should operate independent of the lender’s production department, if practical. At a minimum, prefunding QC must be conducted by individuals who have no involvement in the processing and underwriting decision of the loan being reviewed.
The lender’s prefunding QC plan must be designed in a manner that supports its ability to identify and address defects prior to closing a loan. The results of prefunding loan file reviews provide important and timely feedback to the origination staff, allowing the lender to identify loans with defects (such as analysis or calculation errors, inaccurate data, or inadequate documentation) prior to closing and prevents the lender from delivering ineligible loans to Fannie Mae.
Fannie Mae encourages lenders to implement independent control points throughout the production lifecycle, such as internal and third-party data and analytical tools. Fannie Mae’s own research indicates that these tools can be effective aids in identifying errors and inconsistencies early in the origination process. However, the isolated use of such tools is not a substitute for full file reviews that are a critical component of a comprehensive prefunding QC process.
Share