Selling Guide

Published June 3, 2020

The Selling Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Selling Guide in PDF format.

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COVID-19 FAQs: DU Validation Service (07/01/2020)

COVID-19 FAQs Selling - DU Validation Service

Last Updated: July 1, 2020

In response to the COVID-19 national emergency, Fannie Mae and Freddie Mac have provided temporary guidance to lenders on several policy areas that support selling mortgage originations.  These FAQs provide additional information on the temporary policies. We will be adding more FAQs, therefore we encourage you to check in frequently for updates - refer to the "NEW" or "UPDATED" notations after the question.

Note:  The numbering sequence is from the PDF document that contains all COVID-19 Selling FAQs. These have been separated for easier reference by topic. Click below to access COVID-related FAQs, Lender Letters and other resources:

COVID-19 FAQs

Lender Letters

Other Resources

 

DU Validation Service - FAQs

  1. Why are we temporarily suspending representation and warranty relief for employment validation?

The COVID-19 pandemic has caused job loss, income reduction, and other issues impacting businesses and borrowers. This change along with the other temporary changes to the DU validation service announced in the DU Release Notes on Apr. 9, including age of documentation requirements and use of market-based assets, are part of broader measures put into place to continue to provide sustainable homeownership opportunities while managing risk prudently.

 

  1. What changes can lenders expect to see in DU?

The Desktop Underwriter (DU) validation service will temporarily suspend representation and warranty relief for employment validation. The standard DU verbal VOE (VOE) message will appear in the DU Underwriting Findings (Findings) report, even if an VOI/VOE report is submitted to DU. The DU Findings report will suppress the DU validation service message that would normally appear for “employment validated.” This update will apply to all new casefiles created in DU on or after May 4, 2020.

Verbal VOE message example: Perform and document a verbal VOE for each borrower. For all borrowers who are not self-employed no more than 10 business days prior to the note date, or self-employed within 120 calendar days prior to the note date. Direct verification by a third-party employment verification vendor is acceptable if completed within the same timeframes, and the information is not more than 35 days old (120 days old if self- employed) as of the note date. If the borrower is in the military, obtain either a Military Leave and Earnings Statement within 31 calendar days prior to the note date or a VOE through the Defense Manpower Data Center (https://mla.dmdc.osd.mil/mla/#/home). Lenders also have the option of obtaining the verbal VOE after the note date (and prior to delivery of the loan to Fannie Mae), but when using this option must ensure compliance with the Selling Guide.

Note: Lenders should reference the Selling Guide and LL-2020-03 flexibilities to satisfy the verbal VOE requirement message. Employment verification reports provided by third-party vendors are acceptable for verbal employment verification requirements.

 

  1. Can third-party verification reports still be used for verbal VOE?

Yes. Lenders can still obtain an automated VOE as a way to gain efficiencies in the loan manufacturing process. Employment verification reports provided by third-party vendors are acceptable for verbal employment verification requirements, per the Selling Guide B3-3.1-07, Verbal Verification of Employment.

 

  1. What loan casefiles will be impacted by this temporary change?

Only loan casefiles created on or after May 4, 2020 will be impacted. Loans created before May 4 and resubmitted to DU after May 4 will not be impacted.

 

  1. How does suspending representation and warranty relief for employment validation impact income validation?

We will continue to offer income validation with representation and warranty relief through DU. When a borrower’s income is validated through DU, the lender can rely on DU’s income validation provided the close-by date is met. In addition, DU will continue to review the employment status on the VOI/VOE report and will not validate income if there is any indication that employment is not active. When income is validated, lenders must follow the close-by dates and instructions issued in the income validation DU messages and the Selling Guide to obtain representation and warranty relief.

Because income validation for a borrower is still dependent on the borrower being employed, lenders should continue to verify the employment of the borrower as near to closing as possible and in accordance with the Selling Guide. If the lender discovers that the borrower is no longer employed, the associated income can no longer be considered in the qualification of the borrower, and the employment and associated income information should be removed from the 1003 and the casefile should be resubmitted to DU.

 

  1. Will DU still process VOE/VOI reports?

Yes. DU will still process VOE/VOI reports to issue income validation.

 

  1. What DU message changes can lenders expect?

During this time, DU will no longer issue the “employment validated” message. Instead, DU will issue the standard “verbal verification of employment” message for all casefiles. Lenders can expect to see combinations of the “employment not validated,” “income validated,” and “income not validated” messages, along with the verbal VOE message.
For technology considerations, an Integration Impact Memo will be posted on the Technology Integration page.

 

  1. What is the plan to reinstate employment validation with representation and warranty relief?

We will continue to monitor the economic environment closely. Currently, we expect to reinstate representation and warranty relief for employment validation after Jun. 30, 2020.

 

  1. Does the temporary flexibility allowing lenders to use bank statements or other alternatives to verify a borrower’s employment status still apply?

Yes. The flexibilities outlined in LL-03-2020 under “Verbal verification of employment” continue to apply for loans with application dates subject to the terms of the Lender Letter.

 

  1. Can third-party verification reports still be used for verbal VOE?

Lender Letter LL-2020-03, Impact of COVID-19 on Originations did not change the age of documentation requirements for third-party vendor employment verifications. Therefore, lenders must continue to comply with the requirements in B3-3.1-07, Verbal Verification of Employment, which require the vendor report date to be no more than 10 days prior to the note date, and the information in the vendor’s database (For example, “current as of” date) to be no more than 35 days prior to the note date.

Lender Letter LL-2020-03, Impact of COVID-19 on Originations did update the age of documentation requirements for third-party vendor income verifications:

  • For loan applications prior to Apr. 14, 2020, the vendor report date must be no more than 120 days prior to the note date.
  •  For loan applications on or after Apr. 14, 2020 through May 21, 2020, the information in the vendor’s database (For example, “current as of” date) must be no more than 60 days prior to the note date.

Note: The above guidance does not apply to loans with employment or income validated with the DU Validation Service. See B3-2-02, DU Validation Service for more information.

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