After hearing about Fannie Mae’s Loan Quality Initiative (LQI) and its wide-ranging policy clarifications and changes to technical requirements, credit unions might wonder what LQI offers them. Their mortgage portfolios traditionally present lower risk, and they know more than most lenders about their borrowers, who are both members and owners of these institutions.
In truth, LQI and three of the related technical advances, the Uniform Loan Delivery Dataset (ULDD), the Uniform Appraisal Dataset (UAD), and the Uniform Collateral Data PortalSM (UCDP), could offer a substantial boost to credit unions’ book of business.
LQI will help credit unions identify and address defects in loans intended for sale to Fannie Mae as early as possible in the origination process – well before they are closed and delivered for funding. With its focus on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery, LQI can potentially reduce future repurchase requests. Even if a credit union opts not to deliver loans to Fannie Mae immediately, LQI adds greater certainty about managing risk with the goal of sensible, sustainable lending for the long term.
Fannie Mae Resources Support Adoption and Compliance
The ULDD leverages the MISMO® V3.0 format to include approximately 500 data points that will be eventually required at loan delivery. Using ULDD for data collection and loan delivery provides greater efficiency for smaller operations because it consolidates many steps and forms. Adding data fields can create a burden for lenders who manually enter loan delivery information, so Fannie Mae has compiled a list of vendors ready to offer an automated solution. These vendors can help set up time-saving delivery capabilities that let lenders export their data into MISMO® V3.0 or other XML files, which then can be imported by Fannie Mae’s Loan Delivery application.
Making adjustments can be challenging, especially for smaller lenders who typically have limited resources, but LQI reference materials, instructor-led webinars, and recorded tutorials can help ensure whole loans submitted for sale meet eligibility and underwriting guidelines. Loan deliveries built on higher-quality data are likely to cut processing time and reduce buybacks.
Key LQI Technology Implementation Dates
Starting September 1, 2011: All appraisers must use the new appraisal dataset for appraisal reports
Starting December 1, 2011: Lenders must collect standardized appraisal data and new ULDD data points for new loan applications
Starting March 19, 2012: Appraisal data must be in XML format. For loans with application data after December 1, 2011, the delivery must include the new ULDD data points, and the appraisal data must be submitted to UCDP prior to loan delivery
Smooth Adoption of the New Appraisal Data and Delivery Requirements
The UAD and the UCDP are also major components of LQI and were established under the direction of our regulator, the Federal Housing Finance Agency. These initiatives are designed to improve the quality and consistency of appraisal data on loans delivered to Fannie Mae and Freddie Mac. The UAD defines all fields required for submission for certain appraisal forms and standardizes definitions and responses for several appraisal data fields. The UCDP, which launches June 27, is a single portal for the electronic submission of appraisal data files to both GSEs.
Fannie Mae is working to help customers implement changes smoothly and efficiently. Even credit unions, who have long been the model of responsible lending, can reap the benefits of improved loan quality. LQI and its technology advances will build a strong foundation for the entire mortgage industry.
Recommended UAD and UCDP Readiness Steps
To begin using UCDP, which will be available for submitting electronic appraisal data on June 27, lenders need to complete the following steps:
1) Talk to appraisal providers about obtaining appraisal data in XML format.
2) Determine whether your organization will upload/deliver appraisals to UCDP or if you will designate an agent to upload appraisals and resolve issues on your behalf.
3) Decide whether you will access UCDP by Web‐based interface or direct integration via vendor (lists are available on the GSE websites).
4) Evaluate your appraisal ordering and loan origination processes to determine at what points to submit the appraisal and who will manage any edits and errors.
5) Determine your business process for capturing the submission results (most important: the system-generated “Document File ID”) from UCDP and providing those results to your loan shipping area for inclusion in loan delivery submissions.
6) Identify your “lender admin” who will be responsible for your portal access registration process.