3402.5: Reverifications made by Seller (07/11/16)

© Freddie Mac Single-Family Seller Servicer Guide

The Seller must make certain reverifications on Loan Product AdvisorSM and Non-Loan Product Advisor Mortgages selected for postclosing quality control review. The purposes of the reverification process include:

Evaluating the validity and quality of the information used in the original underwriting decision
Protecting the Seller against fraud and misrepresentation

Sellers should begin reverifying the information listed in this section as soon as possible after the sample selection to facilitate the Mortgage file review.

Reverifications may be in written or verbal form.

All reverification documentation must be retained in the Mortgage file.

(a) Verifications of employment, income and sources of fundsFor postclosing quality control reviews, the Seller must reverify all employment, income and sources of funds used in the original underwriting process and based on the minimum documentation required at the time of origination. Copies of the original verifications should be submitted to the issuers with a request that they confirm the accuracy of the documentation.Any verbal reverifications of employment, income and source of funds must be documented in writing. The written documentation must:

Identify the name of the quality control reviewer who made the contact
Identify the name of the business (employer, bank, etc.)
Identify the name and title of the individual who provided the verification (employer contact, gift donor, etc.)
Show the date(s) of the contact
Confirm that the information in the original verification was accurate or identify any inaccuracy
Identify the phone number for the individual contacted. The phone number must be obtained from an acceptable third-party source.
Identify the name of the third-party source used to obtain the phone number (phone book, internet, 411 information services, etc.)

The Seller must obtain the Internal Revenue Service (IRS) income information using Form 4506-T (or an alternate form acceptable to the IRS that collects comparable information) for each Mortgage selected for quality control review. The IRS form does not need to be resubmitted to the IRS if a response was received during the origination process.

For Borrowers with income that is derived from sources in Puerto Rico, Guam or the U.S. Virgin Islands that are exempt from federal income taxation under the Internal Revenue Code, the above requirements apply, except as follows:

For Borrowers with income that is derived from sources in Puerto Rico, the Seller must submit the Commonwealth of Puerto Rico Form 2907 titled "Request For Copy of the Return, Estate or Gift Certificate of Release" (Modelo SC 2907 "Solicitud De Copia De Planilla, Relevo De Herencia Y De Donacion") to the Puerto Rico Department of the Treasury, Internal Revenue Area
For Borrowers with income that is derived from sources in Guam or the U.S. Virgin Islands, the Seller must submit the Form 4506-T (or an alternate form that authorizes the release of comparable tax information) to the Guam Department of Taxation and Revenue or Virgin Islands Bureau of Internal Revenue, as applicable

(b) Borrower's Social Security numberFor Mortgages included in postclosing quality control samples, the Seller must validate the Social Security number provided by each Borrower.The Seller is not required to validate the Social Security number during the postclosing quality control review, if:

The Seller validated the Social Security number during the loan origination process or a preclosing quality control review; and
The Social Security number was not initially validated by a Mortgage Broker or Correspondent; and
The Mortgage file indicates there were no misrepresentations in connection with the Borrower's application or the underwriting of the Mortgage

(c) Credit reportsFor Loan Product Advisor Mortgages, the Seller is not required to obtain a new credit report. The Seller must verify that the identifying information for any Borrower (name, current and previous address and Social Security number) is true, complete and accurate and that it was properly input into Loan Product Advisor on or before the Note Date. Any credit information obtained from sources other than Loan Product Advisor must be reviewed.For Loan Product Advisor Accept Mortgages and A-minus Mortgages, the Seller is not required to review the Loan Product Advisor provided credit reports to determine that the credit report was properly underwritten, or that it is in compliance with credit underwriting guidelines, except as noted below:

For Accept and A-minus Mortgages, the Seller must verify that the Loan Product Advisor provided credit reports are for the correct Borrower
For A-minus Mortgages, the Seller must review the Loan Product Advisor provided credit reports to determine compliance with Sections 5101.9(c) and 5202.2(b)

For one out of every 10 Non-Loan Product Advisor Mortgages selected for postclosing quality control review, the Seller must obtain either a new Residential Mortgage Credit Report or a three-repository merged in-file credit report.

For the remaining Non-Loan Product Advisor Mortgages in the Seller's postclosing quality control sample, the Seller must obtain new in-file credit reports containing information from one or more of the national repositories.

The new credit report should be ordered from a source other than the original reporting agency. The new credit report must be compared with the credit report used when the Mortgage was originated.

For Manually Underwritten Mortgages, the Seller must re-underwrite the credit and continue to review the Mortgage file documents in accordance with Section 3402.7 to determine that the Mortgage was underwritten to Freddie Mac's requirements.

For all Mortgages selected for postclosing quality control review, the Seller must determine whether additional credit was granted and considered in qualifying when the Borrower's credit report reveals inquiries within the previous 120-day period.

(d) Verification of owner-occupancyFor all Mortgages secured by Primary Residences that are selected for postclosing quality control review, the Seller must verify that the Borrower is occupying the Mortgaged Premises as a Primary Residence.

(e) Property valuationFor postclosing quality control reviews, the Seller must select from the following options:

Option 1 — Of every 10 Mortgages selected for quality control review, one must be a field review and the remaining nine Mortgages may be desk reviews
Option 2 — Of every 10 Mortgages selected for a quality control review, three must be a field review. No desk reviews are necessary for the other seven Mortgages

For purposes of performing field reviews, the following quality control requirements apply:

If the Mortgage is secured by a one-unit property and was originated using an appraisal report, the Seller must obtain a field review with the results reported on Freddie Mac Form 1032, One-Unit Residential Appraisal Field Review Report
If the Mortgage is secured by a two- to four-unit property, the Seller must obtain a field review with the results reported on Freddie Mac Form 1072, Two- to Four-Unit Residential Appraisal Field Review Report
The Seller does not need to obtain a field review during the quality control review if one was obtained during the origination process

The field review must:

Be prepared by a qualified appraiser (as described in Section 5601.3) not affiliated with the original appraiser or appraisal firm
Either concur with, or provide a different opinion regarding, the value and marketability of the Mortgaged Premises as of the effective date of the original appraisal and not as of the date of the appraisal review
Be used to evaluate the quality of the original appraisal report
Include an exterior review of the subject property and comparables
Include a review of the accuracy of the factual data in the original appraisal report

When a desk review of the original appraisal report is required for the remaining Mortgages in the Seller's postclosing quality control sample, the reviewer need not be an appraiser. However, the reviewer must be familiar with the subject's market area and be qualified to:

Address the appropriateness of the data presented in the report
Address the appropriateness of the comparable sales
Conclude that the appraiser's rationale for the final reconciliation of value was supported