Fannie Mae Introduces New Desktop Underwriter Validation Service

Fannie Mae recently introduced Desktop Underwriter (DU) Validation, a service that impacts various Quality Control requirements.  For lenders that opt-in to the new DU validation service, designated vendors, will be used to validate income and employment and assets during the origination process, each such validated item is referred to as a “component”.  The service provides enforcement relief of certain representations and warranties for validated components and is being offered by Fannie Mae for no additional charge; however, lenders must set up agreements with the designated vendors and register with Fannie Mae to use each respective validation service.

The current designated vendors are The Work Number from Equifax® and The Equifax 4506-T Tax Transcript Service for Income and Employment validation and AccountChek^TM by FormFree for Asset validation.  The process flows as follows:

1. After obtaining borrower consent, the lender orders a verification report from a designated vendor.
2. The lender reviews the report and addresses any discrepancies with the borrower.
3. The information is entered and submitted to DU.
4. DU obtains a duplicate copy of the report from the vendor using loan number or reference number.
5. DU performs its own income and asset calculations to arrive at a value that is compared to DU and validates the borrower(s) employment status.
6. DU returns specific messages related to the loan components that have been submitted for validation.
   • Income is validated on a per-borrower and per-income type basis.
   • Assets are validated on a loan-level basis.
   • Employment is validated on a per-borrower and per-employer basis.

Currently only income validation is available for the following sources; however, employment and asset component validation are scheduled to be offered with the DU release on December 10, 2016.

For loans with a component validated by this DU process, the lender is not required to recalculate the validated income or assets as part of its pre-funding Quality Control review or reverify or recalculate the validated information as a part of the post-closing Quality Control process.  A full reverification and recalculation would need to be performed as part of the QC review if any of the following components apply:

1. Could not be or was not validated by DU
2. Was not documented as required with the DU messages
3. The validated information was inconsistent compared to file documentation

For additional information regarding the new DU Validation Service, refer to Fannie Mae’s Frequently Asked Questions.