If you are a lender, you have most likely heard about DUs new initiative, the Day 1 Certainty™, going live Saturday, December 10th.
Like any change, there are tons of questions regarding the process. Data Facts Account Executives are often the first to field questions from our clients about this change and how our mortgage lending services can address the coming needs. We have compiled the ones we are hearing over and over, as well as those that have been addressed by Fannie Mae, to help you stay informed.
Here are the main questions we, as well as Fannie, get about DU Day 1 Certainty.Question: Will Data Facts be on the list as a vendor?
Answer: Yes. Data Facts is in the process of being added to the list of vendors. We will inform our clients as soon as we are added as an option.
NEW! Question: What percentage of income can be validated?
Answer: The DU validation service can validate roughly 80% of income types. Automated verification of income through The Work Number by Equifax covers up to 30% of employers with new employers added all the time. Manual verification of income from Equifax can triple the verification of income rates. Additionally, the 4506-T tax transcript, also from Equifax, expands income types (e.g. pension, self-employed, social security/disability).
NEW! Question: Are there any tolerances applied to the validation of income amounts?
Answer: Yes, there is a general 1% tolerance applied between the income amounts calculated by DU and the amount provided by the lender. Refer to the DU Validation Service Reference Guide for details.
NEW! Question: Are the DU validation services available through DO?
Answer: Yes, the DU validation services are available through DO when the sponsoring lender has been activated for the service.
Question: What types of loans are eligible for the DU validation service?
Answer: The DU validation service is available only for conventional loans. The DU validation service is not available for non-conforming or government (such as VA, FHA, and Rural Development) loans. There may be additional restrictions for income types and other loan components.
NEW! Question: What if a component is not validated by DU? Can that information continue to be used for qualifying purposes?
Answer: Yes. If a component has not been validated by DU, the lender can continue to use the information, i.e., income or assets, to qualify the borrower provided it is documented in accordance with the Selling Guide. When a component is not validated by DU, the DU message will outline the documentation that must be obtained to support the information input by the lender in DU. If a component is not validated, it is not eligible for enforcement relief of the applicable representations and warranties.
Question: Which Loan Origination System (LOS) providers currently participate?
Answer: Fannie Mae has been working with a number of LOS providers. Levels of participation in DU Day 1 Certainty may vary across providers. Please contact your LOS provider directly for more information.
Question: What employment types can be validated through the DU validation service?
Answer: Employment associated with base, bonus, overtime, and commission income (non-military) is eligible for validation. Borrowers with self-employment will not have employment validated, even if they also have a non self-employment source of income.
Question: What are the lender’s responsibilities with respect to income data?
Answer: The lender remains responsible for entering the appropriate amount of income in DU based on a review of the vendor report and any supplemental information it may have in the loan file (including the application or any other income documentation the borrower may have provided). If at any time the lender discovers any conflicting or contradictory information, the lender must investigate the information, including obtaining additional documentation if necessary, and enter the appropriate information in DU.
Question: What are the lender’s additional responsibilities when a component has been validated?
Answer: To preserve the representations and warranties enforcement relief, the lender additionally must take the following steps:
- Confirm that the designated vendor report matches the borrower, including the employer name (for The Work Number reports);
- Investigate any inconsistent or contradictory information, resolve, and then update DU if necessary
- Ensure that the documentation meets the age of credit document requirements as contained in the specific DU messages issued
- Comply with all DU messages and document the file accordingly
Question: When opting in to the service, can lenders select which available options (income/asset/employment) to utilize?
Answer: Yes. When opting in to the DU validation service, lenders can select the options of the service with which they would like to participate.
Question: Can lenders opting in to the DU validation service choose which loans run through the service?
Answer: No. Once a lender activates the DU validation service for income, employment, or assets, the related DU validation service logic will apply to all loans submitted to DU for the registered institutions. If the DU validation service requires a reference number and the lender does not provide a reference number for a loan, DU will issue a message stating that the data could not be validated. There is not a specific ability to opt-out of the service at the loan level.
Data Facts will continue to keep you informed and updated on the DU Day 1 Certainty, its processes, and its impact on your business.
Some information taken from DU Validataion FAQs.