Undisclosed Liabilities

Q1. What is representation and warranty enforcement relief for undisclosed non-mortgage liabilities? 

Representation and warranty enforcement relief (“rep & warrant relief”) for undisclosed non-mortgage liabilities is the confidence that Fannie Mae will not enforce certain representations and warranties for loans with undisclosed non-mortgage debts. When DU issues a message indicating this relief applies, and all other requirements are met, Fannie Mae will not pursue remedies related to these liabilities identified during quality control reviews. 

Q2. What types of debt are included in the rep & warrant relief? 

Non-mortgage debts obtained by the borrower prior to or concurrent with the day of closing are included in rep & warrant relief. Mortgage debt is excluded from rep & warrant relief. This includes home equity lines of credit (HELOCs), second liens, and any other mortgage-related obligations. 

Q3. How will lenders know if a loan is eligible for rep & warrant relief? 

DU will issue a specific message in the DU Underwriting Findings report when a loan casefile is eligible for rep & warrant relief related to undisclosed non-mortgage liabilities. 

Q4. What is required to get rep & warrant relief for undisclosed liabilities? 

The final DU submission must receive an Approve/Eligible recommendation and a DU message indicating that the loan has obtained relief. Relief will apply so long as the lender meets all requirements described in the Selling Guide and complies with applicable DU messages, including closing the loan by the credit report expiration date and delivering the loan with SFC 127 as required for all loans underwritten by DU. See Q7 for more information on requirements during the lender’s prefunding QC review process. 

Q5. How do lenders participate? 

There is no action required by lenders to participate. Eligible casefiles submitted or resubmitted to DU Version 12.0 on or after November 15, 2025, will receive the DU message providing rep & warrant relief.

Q6. How does rep & warrant relief apply to a loan selected by Fannie Mae for quality control (QC) review?

If a loan is selected by Fannie Mae for post-purchase QC review and a Significant Defect is identified related to the liabilities not disclosed by the borrower or discovered by the lender prior to closing, Fannie Mae will not pursue repurchase (or repurchase alternative) if liabilities are covered under the rep & warrant relief, the lender met all requirements related to the relief, and there was no breach of life-of-loan representations or warranties.

Q7. What are the lender’s obligations in prefunding QC if the lender discovers an undisclosed liability on a loan that has a rep & warrant relief message?

If lenders become aware of any new debt during the origination process, then lenders must follow all Selling Guide requirements to recalculate the debit-to-income (DTI) and resubmit the loan to DU based on established resubmission tolerances. 

See B3-6-02, Debt-to-Income Ratios and B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report for resubmission requirements. 

In all cases, if the lender determines that there is new subordinate mortgage financing on the subject property, the loan must be re-underwritten.

Q8. What are the lender’s obligations in post-closing QC if the lender discovers an undisclosed non-mortgage liability on a loan that had a rep & warrant relief message? 

Lenders remain responsible for the review of all source documents to verify the accuracy and integrity of the information used to support the underwriting decision as described in D1-3, Lender Post-Closing QC Mortgage Review, including ensuring all data submitted to DU is true, correct, and complete.

Lenders must continue to adhere to all post-closing QC reverification requirements laid out in D1-3-03, including reverifying the borrower’s credit history by obtaining a new tri-merged credit report and reconciling against the credit report used at origination. 

If the loan received a rep & warrant relief message, then lenders are not required to take into consideration any undisclosed non-mortgage liability in post-closing QC review to confirm the loan’s eligibility if 1) the loan closed by the credit report expiration date, and 2) all conditions for relief were met (including review of source documents for accurate DU data entry and resubmission requirements). Refer to Q11 for more information. 

Q9. What if the lender outsources post-closing QC processes?

Lenders remain fully accountable for all QC requirements, including oversight of outsourced third-party vendors for quality control. Lenders must work closely with any QC vendor to make sure QC-related process efficiencies related to rep & warrant relief are correctly applied only on loans with the appropriate DU messages — and that the QC vendor still performs reverification where it is required.

Q10. How does this rep & warrant relief affect our obligations under ATR/QM? 

Lenders remain responsible for determining what documentation is needed to meet the lender’s obligations under all applicable laws and regulations, including Ability to Repay/Qualified Mortgage (ATR/QM) rule. As with all loans, we provide no assurance to lenders that the loans meet any obligations under applicable law. 

Q11. What are the lender’s additional responsibilities when rep & warrant relief for undisclosed liabilities has been offered? 

The following additional requirements apply: 

• All Verification Messages and Approval Conditions that appear in the DU Underwriting Findings report must be satisfactorily resolved and documented accordingly. 
• All data on which DU’s recommendation is based must comply with Fannie Mae’s verification requirements and the mortgage loan file must be documented accordingly. 
• If the lender becomes aware of, or the borrower discloses, changes in the terms of the loan or verified information (such as income, assets, or liabilities prior to closing) that exceeds the resubmission tolerances specified in B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report (12/04/2019), the data must be updated, and the loan casefile resubmitted to DU.
• If there is information that is conflicting with or contradictory to the data that was submitted to DU, the lender must perform due diligence to investigate and ensure that accurate data is entered into DU. 
• The loan must close by the credit report expiration date. 

Q12. How does rep & warrant relief for non-mortgage undisclosed liabilities apply to life-of-loan representations and warranties? 

The life-of-loan representations and warranties, as part of the broad representations and warranties framework, apply to all loans delivered to Fannie Mae, for the life of the loan. While Fannie Mae provides lenders with enforcement relief for certain representations and warranties, the life-of-loan representations and warranties continue to apply. 

Q13. How does rep & warrant relief for non-mortgage undisclosed liabilities apply to loans with mortgage insurance? 

Lenders represent and warrant that loans sold to Fannie Mae with loan-to-value (LTV) over 80% meet the mortgage insurance requirements set forth in the Selling Guide. Even if a loan meets the criteria for certain rep & warrant enforcement relief, the lender still remains responsible for representations and warranties related to mortgage insurance. If a mortgage insurer rescinds mortgage insurance coverage, lenders may be subject to a repurchase request (or repurchase alternative). Lenders should confirm that the MI company’s recission relief aligns with the rep & warrant enforcement relief offered.