Upcoming Loan Prospector Enhancements to Align with Recent Guide Requirement Changes
February 25, 2014
Loan Prospector® is being updated to align with recent requirement changes related to asset documentation, the Consumer Financial Protection Bureau (CFPB) rules on disclosure of appraisals and other valuations under the Equal Credit Opportunity Act (ECOA), and resubmissions after the note date. Updates to asset documentation feedback messages were implemented on February 23, 2014, with the other updates happening on March 23, 2014. These updates will increase efficiencies in your loan origination process and as a result, help provide you with greater purchase certainty in the loans you sell to Freddie Mac.
Asset Documentation Feedback Messages
On February 23, 2014, Loan Prospector was updated to align with revised asset document requirements provided in Single-Family Seller/Servicer Guide (Guide) Bulletin 2013-18 that are effective for mortgages with settlement dates on or after March 1, 2014. These updates relate to:
- Verifying large deposits.
- Using direct account verification to verify assets.
- Applying Internal Revenue Service employer retirement accounts used for reserves.
- Aligning Streamlined Accept and Standard documentation with eligible borrower funds and documentation requirements.
On or after February 23, 2014, you will receive the following revised feedback messages when applicable, for all submissions and resubmissions to Loan Prospector:
|Message Code||Feedback Messages|
|DOC 3X||Other Assets: For an asset account verified with direct account verification, document the source of funds for any account opened within 90 days of verification or has a balance that is significantly greater than the previously shown balance. If account statements are used to verify an asset account, document the source for any single deposit >25% of the total monthly qualifying income for the Mortgage.|
|DOC B8||Gift Funds: Obtain a gift letter signed by the donor for each gift received. Gift letters must: state the donor’s name, mailing address and telephone number and that the funds are given by a Related Person, identify the Mortgaged Premises, state the amount of the gift and establish that the gift does not have to be repaid.|
|DOC B9||Gift Funds: If the verifications provided in the mortgage file do not show evidence that the gift funds have been deposited in the borrower's account, provide documentation of the transfer of funds from the donor to the borrower. A gift of equity must be reflected on the HUD-1 form or an equivalent closing statement.|
|DOC CP||Retirement Accounts: Obtain account statements covering a 2-month period or a direct account verification reflecting the vested balance or % of vesting, as applicable. Up to 70% of the vested amount minus any outstanding loans may be used for reserves. Document the Borrower is permitted to make withdrawals regardless of current employment status if using accounts for reserves. If the assets are required for closing, evidence of liquidation is required.|
|DOC Y8||Retirement Accounts: Obtain an acct stmt covering a 1-month period or a direct acct verification, reflecting the vested balance or % of vesting, as applicable. Up to 70% of the vested amt minus any outstanding loans may be used for reserves. Document the Borrower is permitted to make withdrawals regardless of current employment status if using accounts for reserves. If the assets are required for closing, evidence of liquidation of non-liquid accounts is required.|
|DOC CN||Depository, Stock, Bond, Mutual Fund and/or other Security Accounts: Obtain an account statement covering a 1-month period or a direct account verification. If the assets are required for closing, evidence of liquidation of non-liquid accounts is required.|
|DOC DS||Depository, Stock, Bond, Mutual Fund and/or other Security Accounts: Obtain account statements covering a 2-month period or a direct account verification. If the assets are required for closing, evidence of liquidation is required.|
|DOC 3Y||Sale of Assets: Obtain bill of sale and evidence of receipt of the proceeds to document proceeds from the sale of an asset other than real property or exchange-traded securities.|
|DOC CD||Sale of Home: Obtain either an executed HUD-1 or equivalent closing statement or if a relocation, obtain an executed buyout agreement (evidencing mortgage will be paid by employer/relocation company).|
|DOC CR||Cash Value of Life Insurance: Obtain a verification from the insurance company that identifies the insurance company and the policy owner(s), shows the period covered and ending cash value and any outstanding loans. If the assets are required for closing, evidence of liquidation is required.|
The corresponding WEB feedback messages are also being added and will be displayed on the Loan Prospector Documentation Checklist.
New Property Valuation Page for HVE Disclosure
In December 2013, we announced new options for how you receive certain Home Value Explorer® (HVE®) point value estimates and related property valuation messages from Loan Prospector. These options were developed in response to the CFPB’s final rule on the ECOA amendment under Regulation B. The final rule requires creditors to proactively provide loan applicants with free copies of all appraisals and other written property valuations developed in connection with an application for credit. For more information about the available options review Guide Bulletin 2013-20.
Loan Prospector may return HVE data on the Loan Prospector Feedback Certificate, which may be shared with a loan applicant or borrower provided that the certificate includes a disclaimer and supporting text. For guidance on sharing the HVE information with applicants and borrowers refer to the Using Freddie Mac Property Valuation Data web page.
On March 23, 2014, the Loan Prospector browser access method will be updated with a new property valuation page, titled Freddie Mac Property Valuation Disclosure Form for Loan Prospector. The link to the new page will be located under the Document Checklist in the left-hand navigation. This printer-friendly page will work like it does today for the Feedback Certificate and Document Checklist. The new property valuation page will contain the same HVE results currently returned in Loan Prospector, including the new and revised feedback messages on the new Loan Prospector style sheet for the HVE values. This page may be shared with a loan applicant or borrower.
As we announced in Guide Bulletin 2013-20, we are now updating Loan Prospector to add the supporting text regarding use of HVE data in the following feedback messages:
|Message Code||Feedback Messages|
|LPN U1||Home Value Explorer (HVE) point value estimates are provided by Freddie Mac and are calculated using various models and techniques proprietary to Freddie Mac. The Lender may have used a different property value to make the credit decision. If you have questions regarding Freddie Mac’s HVE information, please see Freddie Mac’s website at FreddieMac.com/valuation.|
|LPN Y4||Home Value Explorer (HVE) point value estimates provided by Freddie Mac. HVE estimates are calculated using models and techniques proprietary to Freddie Mac, are not appraisals and do not indicate Freddie Mac's acceptance of the appraised value or purchase price entered for the subject property. Lender is responsible for the property appraisal and appraisal representations and warranties, regardless of the HVE estimate. Visit FreddieMac.com/valuation for details.|
In addition to the new property valuation page, we’ve also added a new banner to the HVE (or property valuation) information received through Loan Prospector’s Look-Up HVE Value tool. This banner highlights that the HVE value is not an appraisal and is not used for credit decisions. Here is the content for the disclaimer banner:
“Home Value Explorer® (HVE®) value estimates are provided by Freddie Mac and are calculated using various models and techniques proprietary to Freddie Mac. The lender may have used a different property value to make a credit decision.
If you have questions regarding Freddie Mac’s HVE information, please see Freddie Mac’s website at FreddieMac.com/valuation.
Home Value Explorer is a registered trademark of Freddie Mac. All rights reserved.”
Updates for Changes to Resubmissions after the Note Date
On March 23, 2014, Loan Prospector will be updated to allow resubmissions for up to 120 days after the “Loan Prospector Assessment Expiration Date” that is in effect as of the note date. This change, announced in Guide Bulletin 2014-02 and Guide Bulletin 2013-11, will allow more time for resubmissions enabling you to meet the requirements by submitting true, complete, and accurate data that matches the terms of the mortgage delivered to Freddie Mac.
If resubmitting a loan to Loan Prospector after the note date or effective date of Permanent Financing for Construction Conversion and Renovation Mortgages, select Post-Closing QC as the Loan Processing Stage. Once the Loan Processing Stage of Post-Closing QC is selected and the loan is resubmitted to Loan Prospector, the Loan Processing Stage must remain Post-Closing QC on any additional resubmissions.
After March 23, 2014, if you submit or resubmit a loan in the loan processing stage with the option of Post-Closing QC, you will receive the following new feedback message:
|Message Code||Feedback Message|
|LPR UI||This loan was submitted to Loan Prospector as Loan Processing Stage Post Closing QC indicating submission after the Note Date or Effective Date of Permanent Financing.|
As a best practice always ensure you are entering data in Loan Prospector that is true, complete, and accurate for all submissions and resubmissions.
For More Information
- Review our Single-Family Seller/Servicer Guide Bulletins
- Register for a 60 minute webinar What’s New with Loan Prospector 2014
- Check out the Using Freddie Mac Property Valuation Data web page