D1-3-03, Lender Post-Closing Quality Control Reverifications (06/04/2025)

The reverification proces is used to substantiate there were no material changes that affect the eligibility of the loan as delivered to Fannie Mae. The lender must confirm the accuracy and integrity of the information used to make the underwriting decision. As such, the lender is required to request reverification of the components of the loan file utilized for qualification, which may include income, employment, assets, liabilities, valuation (appraisal or property data collection), and occupancy.

The lender must use the information in the reverification documentation to reconcile the information used to underwrite the loan and make the lending decision.

The lender must pay any applicable fees charged by employers, financial institutions, or other third parties used to obtain reverification information.

The lender may supplement reverification processes with alternative information sources available online, sources maintained by government agencies or other licensing authorities, and through the use of other third parties to obtain a successful reverification result.

All reverification documentation must be retained for at least three years in either the loan file or in the lender's QC records. If the lender uses a vendor to perform reverification services, the lender must be provided, or have access to, the written results and documentation, for at least three years. The lender must provide reverification documentation to Fannie Mae upon request.

If the reverification process reveals information that differs from what was used in underwriting, the lender must re-underwrite the loan to confirm its eligibility for delivery to Fannie Mae.

For all loans selected for full-file review, the post-closing QC review must reverify the following:

• income and employment,
• income using IRS tax transcripts,
• assets,
• credit history,
• property eligibility and property value, and
• occupancy.

As part of its discretionary loan selection process, the lender may choose to make targeted loan selections designed to focus solely on a specific element of the loan, such as product, business source, or underwriting component (for example, income and employment, assets, credit, or property).

When performing discretionary post-closing QC reviews, the lender must align its reverification efforts with the review's focus. For example, if the review target income calculations, only income and employment reverifications are required, while reverification of assets, liabilities, and the appraisal are not. However, if the discretionary selection aims to review loans from a new business source, then all aspects of the loan are included in the review, and all reverifications must be completed.

If the lender cannot obtain required post-closing QC reverifications, the lender must document the loan file with the request date, and that the information requested was not obtained. The lender must track reverification results, including successful reverifications and unsuccessful attempts.

The borrower's income, employment, or assets do not have to be reverified (or recalculated) if they were validated by the DU Validation Service, and

• the lender satisfied all the requirements for obtaining representation and warranty enforcement relief (as described in A2-2-04, Limited Waiver and Enforcement Relief of Representations and WarrantiesA2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties), and
• the loan closed by the "Close by Date" stated in the DU validation message.

Income and Employment

The lender must obtain updated records verifying that all borrowers remain employed with the employer listed on the loan application through closing, and that all income of all borrowers has not changed to the point where the loan is ineligible for delivery to Fannie Mae. Documentation that is a replica of the initial income/employment verification does not meet this requirement because it does not provide updated records to verify the income or employment have not changed through the note date.

Reverification of income and employment may include current and previous employment depending on what was utilized in DU for eligibility assessment.

A verbal reverification of employment and income is acceptable if the lender documents the conversation, including the date, name, title, and contact information of the person providing the details.

Income using IRS Tax Transcripts

The post-closing QC review must include the lender's submission for tax transcripts to the IRS (or designee) using the IRS Form 4506-C, or an alternative IRS form or process that authorizes the release of comparable tax information.

Post-closing QC tax transcripts validate the income documentation provided by the borrower that was utilized during the underwriting process. Transcripts must be requested for all income types used in the underwriting process (personal and business, if applicable). If tax returns were required in the underwriting of the loan, the lender must reconcile the transcript information received from the IRS with the income documents in the loan file. See B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-CB3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C, for detailed information.

The following exception applies:

If the lender obtained the appropriate IRS transcripts during its preclosing process (processing and underwriting), it may use the same documents in its post-closing QC process, without ordering new transcripts. The lender is not required to request tax transcripts for a borrower when all the borrower's income is validated by the DU validation service.

At times, the lender may encounter difficulties in obtaining IRS tax transcripts for post-closing QC, such as:

• the transcript request is rejected by the IRS with a Code 10 indicating "Due to Limitations, the IRS is unable to process this request";
• the transcript request is rejected because of missing, incomplete, illegible, or altered information on the Form 4506-C (Codes 1-9); or
• automated methods for obtaining tax transcripts are unavailable.

Note: Fannie Mae expects the lender to carefully review transactions and take prudent measures to investigate red flags that may indicate the presence of fraud. The lender must have fraud investigation processes and procedures in place regarding potential identity theft scenarios. The lender should keep in mind that Code 10 is a potential indicator of fraud or identity theft and should exercise the appropriate level of caution in confirming a borrower's identity when a Code 10 has been returned by the IRS.

If the lender attempts to execute Form 4506-C with the IRS but is unable to obtain a transcript due to receiving a rejection Code 10, the lender does not need to take further steps to attempt to obtain a transcript.

For issues other than rejection Code 10, the lender should attempt to obtain a corrected and signed Form 4506-C. If a lender chooses not to get the corrected form, or is unable to obtain a corrected form, it must have a process to cite a moderate defect and implement a corrective action plan, where appropriate.

The following table describes alternative reverification options for Social Security and military income.

Assets

The lender must request reverification of all sources of funds used for the down payment, closing costs, and reserves, including any reserves required to be verified by DU, using original documentation from sources including, but not limited to financial institutions, third-party asset report providers and gift donors. The reverification documentation obtained in post-closing QC must be compared to the documentation from origination to authenticate the amounts used are accurate and to ensure no documentation alterations were made.

When a third-party asset verification report is provided to DU for an assessment of rent payment history or a cash flow assessment, reverification of the full 12 months of asset data is not required. Reverification of the assets used specifically for verification of assets is required as described above.

Credit History

The post-closing QC review must include reverification of the borrower's credit history.

If a borrower's credit was evaluated by using a traditional credit report, the lender must reverify the borrower's credit history by obtaining a new tri-merge credit report. The new report does not need to generate a new inquiry that will appear on future credit reports or include trended credit data; even if reflected on the credit report used for underwriting purposes. The lender is not required to analyze trended credit data in the new credit report.

If a borrower's credit history was evaluated by using nontraditional credit or a nontraditional mortgage credit report, the lender must reverify each of the credit references on that report. If the lender obtained written references from creditors, the lender's QC review process must include reverification of each of the credit references.

The liability information obtained on the new credit report must be reconciled against the credit report or references used at the time of underwriting to identify any discrepancies or the existence of any debt that may not have been taken into account when the loan was underwritten. The lender must also review any "potential red flag" message appearing in the DU Underwriting Findings report, or alerts created by sources other than DU associated with the credit report, to ensure all messages have been addressed, documented, and that the loan is eligible for sale to Fannie Mae.

Property Eligibility and Property Value

The lender must complete a collateral risk assessment for loans with an appraisal or property data collection.

Full appraisal collateral risk assessment must include the elements shown in the following table.

If the lender is unable to complete the collateral risk assessment or evaluate the origination appraisal, it may order either a desk review or field review from a licensed appraiser. The desk review or field review must account for all of the above collateral risk assessment requirements.

Property data collection collateral risk assessment must include the elements shown in the following table.

Occupancy

The post-closing QC review must include occupancy assessment for the subject property. The lender must review the loan file documentation (for example, property insurance policy, appraisal, income tax returns or transcripts, lease agreements, etc.) to confirm the documented occupancy is accurate.

When occupancy red flags are identified, the lender must further investigate. For example, the lender may use publicly available listing or sale information or hire a door-knock service to ensure the occupancy status is accurate.