From time to time Fannie Mae engages third party due diligence providers (each, a Diligence Provider) to conduct limited reviews of mortgage loans that Fannie Mae acquires and includes in fully-guaranteed MBS. The due diligence reviews are performed on a portion of the loans that Fannie Mae acquires each quarter. We pay the fees and expenses of each Diligence Provider and the scope and design of each review are determined by us in consultation with the applicable Diligence Provider.
Selection of the diligence sample for each review is limited to those mortgage loans that previously were reviewed by us as part of our random post-purchase QC review (the “Fannie Mae QC Review”) and that met the Eligibility Criteria (as defined below). Such mortgage loans are referred to as the "Eligible Review Population". Each Diligence Provider receives access to a comparable set of credit, property and compliance data and documents that we review as part of the Fannie Mae QC Review.
The Fannie Mae QC Review involves full credit and property valuation reviews for each mortgage loan. In addition, certain mortgage loans are subject to compliance reviews. From the Eligible Review Population, a Diligence Provider randomly selects a statistically determined number of mortgage loans (the "Diligence Sample") for its reviews.
For the purpose of selecting the Eligible Review Population, the Eligibility Criteria includes loans that generally meet the following criteria:
- is a fully amortizing, fixed rate, first-lien mortgage loan secured by a one- to four-family dwelling unit, townhouse, individual condominium unit, individual unit in planned unit development, individual cooperative unit or manufactured home, with an original term of 241 to 360 months;
- was acquired by us during the applicable designated acquisition periods (generally a specified quarter of a given year);
- has an original loan-to-value ratio that is (i) greater than 60% and (ii) equal to or less than 97%
- was not originated under our Refi Plus program (which includes but is not limited to the Home Affordable Refinance Program ("HARP"));
- has an original combined loan-to-value ratio that is less than or equal to 97%;
- is not covered by pool insurance;
- was not originated under certain non-standard programs; and
- is a conventional loan (i.e. is not guaranteed by the Federal Housing Administration ("FHA") or the U.S. Department of Veterans Affairs ("VA")).