Fannie Mae Selling Guide D1-2-01 — Lender Prefunding Quality Control Review Process

Fannie Mae Selling Guide D1-2-01 — Lender Prefunding Quality Control Review Process

D1-2-01, Lender Prefunding Quality Control Review Process (04/01/2026) Introduction This topic contains information on the lender’s prefunding QC process and loan file reviews, including: Overview Timing of File Reviews Loan Selection Process Review Types Overview The lender must maintain and implement a written prefunding QC plan that outlines requirements for reviewing a sample of its loans prior to closing or, in the case of loans acquired from a delegated third- party, prior to acquisition. The lender must have documented procedures that include, at a minimum, the following elements: timing of the prefunding QC file reviews, loan selection process, and verification of data and documents. The lender’s prefunding QC process must operate independent of the lender’s production process, if practical. At a minimum, prefunding QC must be conducted by individuals who have no involvement in the origination, processing or underwriting functions of the loan being reviewed. The lender’s prefunding QC plan must be designed in a manner that supports its ability to identify and address defects prior to closing or acquiring the loan. The results of prefunding file reviews provide important and timely feedback, allowing the lender to identify loans with defects (such as analysis or calculation errors, inaccurate data, or inadequate documentation) prior to closing or acquiring the loan, and prevents the lender from selling ineligible loans to Fannie Mae. Timing of File Reviews Prefunding QC reviews must be conducted early enough in the origination process to allow adequate time to make loan selections, complete the reviews, and properly inform the loan production staff so that corrections can be made prior to loan closing or acquisition. The lender must complete the review when there is sufficient documentation in the file to perform the required review of data and documents described in Review Types, below. Loan Selection Process The lender's prefunding QC plan must contain requirements for full-file reviews and analysis of data and Published May 6, 2026 1047 documents prior to funding. In addition to the required full-file reviews, the lender may choose to conduct component reviews by making loan selections designed to focus solely on a specific element of the loan or underwriting component (for example, income and employment, assets, credit, or property). Component reviews may be completed without performing a full-file review. They should be completed in areas the lender believes pose unique or elevated risk, or to confirm that a particular control or process is working as intended, such as newly added controls or processes. A full-file review is a comprehensive review of the underwriting decision while a component review is a review of a specific element. The lender must establish and document a monthly process for selecting loans for its prefunding QC reviews. The process should take into account the lender’s assessment of the risks inherent in its origination processes, business sources, production channels, volume, and product mix. The lender should regularly review its risk assessments to ensure the sample selected, including sample size, is appropriate. The monthly sample must include selections from each of the lender's production channels. Fannie Mae reserves the right to require the lender to make adjustments or impose minimum sampling requirements if a lender's approach does not provide adequate representation or effectively identify risk. Review Types Leveraging a mix of full file and component reviews can enable lenders to review more loans and provide a broader comprehensive risk review than simply performing a full review on all loans sampled. Full-File Reviews Full-file reviews are comprehensive reviews of an underwriting decision and must include review of, at a minimum, the following data and documents to ensure the documents are present and complete, and that the data relied upon in making the underwriting decision is accurate. A full-file review must include an assessment of all of the following: data entered into an automated underwriting system; borrower Social Security number(s); income calculations and supporting documentation; employment documentation, including verbal verification of employment; assets needed to close or meet reserve requirements; appraisal or other eligible collateral data or documentation, if applicable, including reconciliation of CU flags and messages; adequate mortgage insurance coverage as required for the loan transaction. See B7-1-02, Mortgage Insurance Coverage Requirements for additional information; and occupancy. For loans with income or assets validated by the DU validation service, the lender is not required to recalculate validated income or assets as part of its prefunding QC review. However, the lender remains responsible for confirming that the verification report ID matches the ID captured in the final DU findings report and the verification report has not expired. For all loans, including those with validated income, assets, and employment, the lender must continue to ensure the information it enters in DU is appropriate based on its review and investigation of any inconsistent or contradictory information in the loan file and the verification report. Published May 6, 2026 1048 Component Reviews Component reviews focus on specific elements of a loan and typically can be completed more efficiently than full-file reviews. Targeting high-risk elements can help create visibility into unknown risks and confirm controls are working effectively. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2026-03 April 01, 2026 Announcement SEL-2025-04 June 04, 2025 Announcement SEL-2023-09 October 04, 2023 Announcement SEL-2023-02 March 01, 2023 Chapter D1-3, Lender Post-Closing QC Mortgage Review Introduction This chapter explains the requirements for a lender’s post-closing QC review process. It addresses the timing of file reviews, the process for selecting random and discretionary loan samples, review of data used in underwriting, and reverification requirements.

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