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Process Optimization in Financial Services

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Loan Quality Initiative

Fannie Mae logo  Lender Letter LL-2010-03, An Introduction to Fannie Mae's Loan Quality Initiative


Historically, many issues related to compliance with Fannie Mae selling policies are not detected until after loans are delinquent or through the foreclosure process. Loan repurchase requests to lenders have increased in the past three years, highlighting the need for an improved approach for working with lenders to deliver loans that meet Fannie Mae's underwriting and eligibility guidelines. Fannie Mae conducted an extensive analysis to determine the primary drivers of repurchase requests and is launching the Loan Quality Initiative (LQI) to identify and implement policy, process, and technology enhancements to improve the compliance with underwriting and eligibility guidelines and mitigate repurchase risk.



Working with its lender partners, Fannie Mae will implement the LQI enhancements to promote improved loan delivery data that is complete, accurate, and fully reflective of the terms of the mortgage. The LQI will also help ensure that the loan meets the credit and eligibility standards, pricing guidelines, and other requirements of the Selling Guide or negotiated variances. A primary focus is on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery.



This updated approach is designed to stand the test of time across market cycles and risk tolerances, thus supporting market stability and reducing investor and lender risk. Changes introduced under the LQI are intended to reduce repurchase requests through improved data integrity and consistent and early feedback on policy compliance while maintaining the current business model of relying on lenders to make appropriate decisions in accordance with Fannie Mae's guidelines - From eFannieMae.com

  • Announcement SEL-2010-01, Selling Guide Updates for the Loan Quality Initiative
  • LQI Summary (LL-2010-03) with Key Dates and Resources
  • FAQs for LL-2010-03
  • Lender Tips for Identifying Undisclosed Liabilities
  • Live Web Seminars
  • Collateral Data Delivery (CDD) page
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