Mary Kladde
What does it mean to be a direct seller to FNMA and FHLMC? The approval process is arduous and rigorous, but once you are in. YOU’RE IN! It’s even better if you were in, prior to the rush to become a direct seller. Rumors also abound that applications have been suspended to boot.
Imagine my surprise when I searched the term “quality control” on the Fannie Mae Single Family Guides Site – only to get an error that read: ”Microsoft VBScript runtime error ’800a0009′ Subscript out of range: /efnma/srch/results.asp, line 610.” I have to admit, I chuckled when it popped up. Coincidence you say? In light of the last year and a half, I’m not so sure.
After a lender goes through the process of getting approved to be a direct seller/servicer, all that is required for purchase and to fulfill the lender’s commitment is the delivery of the Note(s) with the proper endorsement. Upon receipt, sale/purchase is considered a done deal…for the most part. The loan(s) could be pulled for a random audit, but chances are in the lender’s favor that the loans will get a pass.
FNMA seems to have blinked and missed all the media related to quality lending; not to mention the amount of regulation being approved in order to deal with “quality lending” issues. FNMA continues to buy loans based on the strength of their lenders rather than the quality of individual loans that are being purchased. The standard of the FNMA points/fees that are required to be met by seller/servicers continues to be run once a loan goes into default or through random QC samplings rather than prior to loan purchase.
Besides the market’s liquidity constraint and faster purchase turn times associated with being a direct seller, the lack loan specific due diligence and quality review prior to purchase is the next best reason for lenders to seek direct seller status.
