GSEs: Lenders must address quality issues for ‘fatal data points’ before delivering loans

Fannie Mae and Freddie Mac jointly announced this week that they have entered a new critical edit phase for their Uniform Closing Dataset (UCD) as of Nov. 6, informing lenders that they must address quality issues for “fatal data points” before delivering loans to either of the government-sponsored enterprises.

The UCD is a reference file that lenders use to share key information about a mortgage loan with organizations like Fannie Mae and Freddie Mac, particularly about the Closing Disclosure (CD) that outlines the final details of a mortgage loan.

To “improve data quality and consistency for single-family loans that the GSEs purchase,” the GSEs announced in August of 2020 that they would begin “a multi-year transition to convert certain edits in their UCD collection solutions from ‘warning’ to ‘critical / fatal.’ The transition is designed to enhance data quality and consistency for single-family loans the GSEs purchase.”

Phase three of the edits was slated to begin in May 2023, but in April was split into two subsets to give lenders “additional time to work with your software provider and analyze your data to resolve high-firing phase three edits.”

An implementation guide released in May 2022 shows that phase three deals with information related to loan costs; other costs; total closing costs; and lender credits.

The GSEs are actively preparing for the next phase of UCD critical edits, phase four. Updated requirements for this phase’s critical edits are expected to be included in the UCD Specification update which is expected sometime in 2024, though a date has not yet been finalized according to the GSEs.

The GSEs are advising lenders and technology partners to anticipate a transition period similar to that of phase three, with the GSEs emphasizing the need for “proactive compliance.”

The mortgage industry has pushed back on the GSEs for the rise in loan buyback requests from loans originated during the pandemic. FHFA Director Sandra Thompson last month said the agency is working to provide more clarity on its framework and use alternatives amid the spike in loan buybacks.

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