Frequently Asked Questions

Q1. What is the benefit of the validation service?

Fannie Mae recognizes the challenges lenders and borrowers encounter when originating loans – frustration with the length of time it takes to close a loan and the paper-intensive nature of gathering and processing borrower information. Fannie Mae also recognizes that lenders would like to retain their competitive advantage by reducing costs, increasing their processing efficiency, and enabling a superior borrower experience.

The DU validation service offers our lenders greater transparency and a more efficient mortgage origination process. By leveraging automation, analytics, and third-party data sources, Fannie Mae is able to provide Day 1 Certainty™ in the form of enforcement relief of certain representations and warranties for validated loan components.

For loan officers, the DU validation service can streamline the documentation process for borrowers and may provide process efficiencies throughout origination. By digitally validating a borrower’s asset, income, and employment information, loan officers can reduce the need to collect paper documents from their customers. The time saved by digital data validation may help reduce the overall loan cycle time, allowing borrowers to close on their home faster. This may free up resources, potentially allowing the loan officer to process more loans overall.

Q2. What is required to get Day 1 Certainty on validated loan components?

As long as the lender meets all DU validation service requirements described in the Selling Guide and complies with applicable DU messages, the lender receives Day 1 Certainty for validated components.

Q3. How does the DU validation service work?

The DU validation service uses information provided in third-party verification reports to validate borrowers’ income, employment, and asset data in DU. In most cases, the loan officer will not need to collect paper documents for validated income, employment, and/or asset data.

The following steps represent a general, high-level workflow:

• After obtaining borrower consent, the lender orders an eligible verification report from a vendor.
• The lender reviews the report and addresses any discrepancies with the borrower.
• The lender enters information into DU and submits.
• DU obtains a duplicate copy of the report from the vendor using loan number or reference number.
• DU performs its own income and asset calculations to arrive at a value that is compared to DU. Employment status can also be validated.
• DU returns specific messages related to the loan components that have been submitted for validation.
  • Income is validated on a per-borrower and per-income type basis.
  • Assets are validated on a loan-level basis.
  • Employment is validated on a per-borrower and per-employer basis.
• The lender can take advantage of processing and underwriting efficiencies for components that have been validated.
• The lender closes the loan and delivers to Fannie Mae.

Q4. Can lenders obtain details about the logic used by DU for validation purposes?

The DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) provides the details of the logic used by DU to validate income, employment, and assets. You can access this guide on our website, using your Fannie Mae login credentials for DU, Desktop Originator® (DO®), or Fannie Mae Connect™.

Q5. What types of loans are eligible for DU validation service?

The DU validation service is available only for conventional loans. Non-conforming or government loans (such as VA, FHA, and Rural Development) are not eligible. There may be additional restrictions for income types and other loan components. Refer to the Selling Guide and the DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) for more detail.

Q6. Fannie Mae allows lenders to use third-party data verification vendor reports to manually document income, employment, and assets. How is the DU validation service different?

The Selling Guide has for some time permitted use of verification reports from third-party data vendors to document and assess employment, income, and assets, but the lender remained accountable for the integrity of the information obtained from these sources.

The DU validation service extends this concept by using data from eligible verification reports, digitally assessing it in DU, and providing enforcement relief of certain representations and warranties when a loan component has been validated.

Refer to the Selling Guide for more details.

Q7. What is an “eligible verification report”?

Multiple industry vendors offer borrower verification services. To mitigate the risk that Fannie Mae assumes by offering representation and warranty relief on validated loan components, we have a structured process and guidelines for determining which reports will be accepted for verification. Refer to the DU Validation Service Reference Guide for the list of eligible report types for each Fannie Mae approved vendor.

Q8. Can lenders work with resellers of eligible verification reports?

Yes. Fannie Mae has an open platform for data vendor participation to provide choices to our customers. Lenders may participate in the DU validation service through relationships with vendors of their choice that can provide Day 1 Certainty verification reports accepted by Fannie Mae, including “resellers” of eligible reports. View the Current Data Vendor List for more information.

Q9. Does Fannie Mae plan to add more report providers?

Yes. We are in active discussions with other report providers. Fannie Mae has developed a structured process for adding eligible reports to the DU validation service. Vendors may provide their lender customers access to (1) the vendor’s own eligible reports, (2) eligible reports from other report providers, or both. View the Data Vendor Process for more information on how vendors can participate in the DU validation service. Access the Current Data Vendor List to view eligible report providers and report distributors.

Q10. Is the DU validation service available through DO?

Yes, the DU validation service is available through DO for most components regardless of the loan status. Income and employment validation using an asset report is only available when the loans is assigned to a sponsoring lender that opted-in to use this functionality.

Q11. Which loan origination system (LOS) providers currently participate?

Levels of integration with an LOS may vary across providers. Please contact your LOS provider directly for more information.

For those with custom loan origination systems, please reference the DU Validation Service Integration and Testing Document for more information.

Q12. Is there a cost associated with using the DU validation service?

Fannie Mae does not charge a fee for using the DU validation service. Lenders should contact the vendor(s) of their choice to discuss their product pricing. (See the Current Data Vendor List for report vendors.)

Q13. How do lenders participate?

To use the service, a lender must provide the information required for DU validation service to obtain the third-party verification report. For most vendor reports, loans will be assessed through the DU validation service if the lender provides the data in the DU submission to enable DU to obtain a copy of the vendor report.

Lenders must execute contracts with verification report vendor(s) (previous or existing contracts may require an amendment) related to the DU validation service. With the exception of Equifax/The Work Number and distributors of their reports, originators can then begin using the DU validation service immediately. For Equifax, an additional registration step is required:

Q14. Can a lender choose which loans run through the DU validation service?

In general, the DU validation service will run and messages will be issued for loans where a vendor is selected from the drop down and a reference number is entered in the additional information field in DU. If a lender is set up to use the automated Equifax/The Work Number process, the DU validation service logic will apply and corresponding DU messages (including verification report not found) will be issued to all loans submitted to DU for the registered institutions.

Q15. What if a component is not validated by DU? Can that information continue to be used for qualifying purposes?

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.

Q16. Can a lender utilize any vendor for the DU validation service?

A number of vendor options are available to lenders, but only vendors who are able to provide eligible verification reports accepted by Fannie Mae may be used for the DU validation service. View the Current Vendor List for more information.

Q17. What documentation is required for components that have been validated?

Specific messaging will be issued by the DU validation service regarding the documentation required to support the particular loan component (e.g., income, assets, and/or employment). When a component has been validated, the vendor report may be sufficient documentation.

Q18. Is there any lender-level reporting available for DU validation service loan casefiles?

Lenders can access both Day 1 Certainty Pre-Delivery and Post-Delivery reports in Fannie Mae Connect™. The reports show loans that are eligible for representations and warranties enforcement relief on validated loan components and provide a lender-level and responsible party dashboard of Day 1 Certainty activity, as well as loan-level details for the DU validation service. The reports can be found in the Management section of the Report Center in Fannie Mae Connect.

Q19. Does the DU validation service support third-party originator (TPO) business models?

Yes. Please engage the report providers directly as they may have specific requirements in terms of who can order, view, and pay for reports.

Q20. Does the DU validation service support correspondent business models?

The lender / aggregator purchasing the closed loan from the correspondent (and selling the loan to Fannie Mae) will have access to the results of the DU validation service via the DU Underwriting Findings and CU Underwriting Findings Report if the correspondent lender opts in to the DU validation service. Fannie Mae provides validation reporting for delivered loans with income, assets, and/or employment validation on a monthly basis.

Q21. If a correspondent lender participates in the DU validation service, does the representations and warranties enforcement relief “transfer” to the lender / aggregator that purchases the loan AND sells the loan to Fannie Mae?

Yes, the representations and warranties enforcement relief for validated components “transfers” from the correspondent lender to the purchasing lender / aggregator when that loan is sold to Fannie Mae. As mentioned in Q20, the purchasing lender / aggregator can identify validated components of the borrower’s loan file via the DU Underwriting Findings Report, but it is important to note that there are additional lender responsibilities that must be met to enable the representations and warranties enforcement relief (e.g., compliance with DU messages, ensuring the vendor report matches the borrower information, and performing due diligence if there is conflicting information in the file as further outlined in the Selling Guide).

Q22. Does the DU validation service evaluate large deposits?  

The assessment of large deposits is automated through the DU validation service for asset validation. When assets are validated, a message will be issued in DU when the source of a large deposit must be documented. See the DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) for additional information. 

Q23. Which types of assets can be validated?

Q24. Are there any restrictions on the transactions eligible for asset validation?

Yes. If any borrower on the loan is using employment-related assets as income, the loan is not eligible for asset validation.

Q25. Are ”Gift Funds” eligible for asset validation?

Yes. Transactions with ”Gift Funds” are eligible for asset validation. If assets with ”Gift Funds” are validated, DU will issue a message indicating that the lender should confirm that the deposited gift funds are from an acceptable source and are eligible for the transaction per the Selling Guide (B3-4.3-04, Personal Gifts).

Q26. Are business asset accounts an acceptable asset type?

Business assets are an acceptable source of funds when the borrower is self-employed and the lender has evaluated the individual federal income tax returns, including, if applicable, the business federal income tax returns for that particular business (non-Schedule C). The borrower must be the owner of the account. The lender must perform a business cash flow analysis to confirm that the withdrawal of funds for the transaction will not have a negative impact on the business.

The current logic used for asset validation in DU will aggregate asset information from both personal and business accounts (provided the borrower selected to provide those accounts).

Q27. Is earnest money included in the amount of assets validated by DU?

Lenders must determine whether any earnest money deposit has cleared the borrower’s account and follow the standard Selling Guide provisions for entering earnest money in DU.

If the funds have cleared the borrower’s asset account, the earnest money must be entered as an “Other Credit” in DU and the lender must comply with the standard DU message that requires verification of the source of funds. In these cases, the amount of earnest money is not included in the amount of assets validated by DU.

If the funds have not cleared the borrower’s bank account, the amount can be included in the depository account, such as a checking or savings account. In these cases, it will be included in the amount of assets validated by DU.

Q28. What happens if the amount of assets required to complete the transaction at time of closing is different from the amount of assets validated by DU?

In some cases, the amount of assets needed at time of closing is different from originally input into DU and validated by the DU validation service. Lenders must ensure that there is documentation in the loan file to support the full amount of assets required at time of closing. Refer to the Selling Guide to determine whether the loan is required to be resubmitted to DU. The DU validation service will include a message reminding lenders of this requirement.

Q29. What is the tolerance for comparing the amount on an asset verification report to the asset amount input in DU by the lender?

In order to receive validation for assets, the borrower assets that DU calculates based on information from the asset verification report must be greater than or equal to the Total Funds to be Verified amount in DU. Refer to the DU Validation Service Reference Guide for more information.

Q30. Can assets observed in an asset verification report be validated if a borrower is also relying on anticipated proceeds (‘Net Equity’) from the sale of a property to close?  

The DU validation service will validate the sum of the balance of eligible accounts in the asset verification report when this amount plus the Net Equity amount reported in DU is greater than or equal to the DU Total Funds to be Verified amount.  DU will issue a message providing the amount of assets validated using the asset verification report and the amount of Net Equity that must be documented.  Lenders must follow the Selling Guide requirements related to documentation of Anticipated Sales Proceeds.

Q31. How does the DU validation service handle large deposits when validating assets for refinance transactions?

The DU validation service will identify large deposits in accordance with the definition provided in the Selling Guide and will determine when large deposits need to be verified by the lender. (Refer to the Selling Guide, B3-4.2-02, Evaluating Large Deposits, for more information.) Since large deposits do not need to be documented on refinance transactions, no DU validation service messaging will be issued for large deposits on refinance transactions.

Q32. Should the lender attempt asset validation for every loan?

There may be times when asset validation is not required for a loan (for example, asset validation is not required for refinance transactions), and lenders should develop guidance for loan officers in accordance with the asset verification requirements outlined in the Selling Guide.

Q33. How does the DU validation service calculate income for validation purposes?

The DU validation service has embedded calculations that cover various income types.

Refer to the DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) for details on calculations and logic that will be used by DU for validation purposes.

Q34. Are any tolerances applied to the validation of income amounts?

Yes, there are tolerances applied between the income amounts calculated by DU and the amount provided by the lender. Refer to the DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) for details.

Q35. What types of income can be validated?

The income types shown below can be validated. Day 1 Certainty with representations and warranties enforcement relief is provided on successfully validated loan components.

Q36. What are the lender’s responsibilities with respect to income data?

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.

Examples of contradictory information are provided below:

• A borrower earns base and bonus income and has provided a breakout of these income types on the loan application when reporting his income, but the verification report shows a combined income amount for base and bonus in the “base income” field on the verification report. The lender must investigate the discrepancy and appropriately enter the borrower’s base income and bonus income separately into the appropriate fields in DU.
• A borrower previously earned base and overtime income, but the lender learns during the loan application process that the borrower recently changed positions with his employer and, as a result, is no longer eligible for overtime. The lender must enter only the new base income amount into DU, and only that base amount will be validated by DU. The lender must disregard any overtime income that may have been reported on the verification report for past pay periods.
• A lender discovers conflicting information provided by the borrower or in the loan file and determines that the income is lower than what was entered into DU and reflected on the vendor report. The lender must enter the lower amount into DU and re-submit the casefile, regardless of whether the higher income was validated by DU.

In each of the above cases, if the lender relies solely on the information on the vendor report, disregarding the supplemental information contained in the loan file, the representations and warranties enforcement relief related to validated data will not apply, regardless of whether DU validated the income. The lender will need to document the amount of income entered in DU.

Q37. What if a borrower has disputed their employment and/or income data?

Some income and employment verification report vendors permit consumers to dispute their employment and/or income data. If an employment and/or income record has an active dispute, the DU validation service will not use that record to validate employment or income. Once the dispute has been resolved, a lender can order a new report through the vendor and resubmit to DU with an updated reference number to have that record evaluated by DU.

Q38. Some of the income calculations used by the DU validation service differ from standard Selling Guide. Are lenders still permitted to use the Selling Guide calculations, even if it would result in a higher amount of income than DU will validate?

Yes. If the borrower’s income is not validated due to the calculations used by the DU validation service (e.g., income history does not meet the requirement for the DU validation service), but the income is eligible per the Selling Guide, the lender may document the income per standard Selling Guide policy. In this case, the lender will not receive validation of that component and may be required to obtain additional documentation.

For example, the Selling Guide recommends a minimum 24-month history of commission income but does allow commission income that has been received for 12 to 24 months as long as there are positive factors to reasonably offset the shorter income history. The DU validation service logic requires a minimum 24-month history to validate commission income. If the lender has determined that there are positive factors to offset the shorter history and the requirements of the Selling Guide are met, the income can be used but will not be validated.

Q39. There could be certain information that is provided on a paystub, such as garnishments, but not included in the income and employment verification report. Are lenders still responsible for identifying liabilities that could appear on a paystub?

The DU validation service does not relieve lenders of the requirement to identify liabilities that may affect the borrower’s ability to fulfill the mortgage payment obligation. Lenders should continue to use non-automated processes for assessing liabilities, such as reviewing the borrower declarations on the application, the credit report, preliminary title work, or other documents that may suggest additional obligations exist. While not required for income validation through the DU validation service, lenders may choose to continue collecting paystubs, other documentation, or other third-party reports as a way to resolve concerns and to confirm they are accurately calculating the borrower’s monthly obligations for qualifying purposes.

Q40. May a lender resubmit a loan to DU to obtain validation if a loan component did not receive validation on the initial submission?

Yes. A lender can correct an error or omission, or update data, and resubmit the loan to DU. For example, resubmission could be due to:

• A matching error with the vendor report where the lender can update the loan number, borrower Social Security number, or reference number to receive a match.
• The DU message indicating that a lower amount of income was validated by DU based on the vendor report. In these cases, the lower amount of income can be input into DU and the file resubmitted to receive validation of income.

Q41. What analysis occurs with “Other Income” that appears on an income verification report?

DU does not use any income reported as “other” on the income verification report due to the inability to determine what type of income “other” represents. Lenders can continue to use this income for qualifying purposes if additional documentation is obtained to meet standard Selling Guide requirements, even though it is not eligible for validation.

Q42. Do lenders need to order a tax transcript on every loan in order to receive income validation?

No. Lenders should refer to the table in the DU Validation Service Reference Guide under Report Providers and Verification Reports, Income Types, and DU Input to determine which income types and circumstances require a tax transcript in order to receive income validation.

Q43. What is the impact to income validation when an updated verification of employment report indicates the borrower is no longer actively employed?

Income validation is contingent upon employment validation. If DU is not able to validate employment at the time an updated verification of employment report is submitted to DU, then DU will no longer validate income from this employer. In that case, the lender should follow standard income and employment documentation requirements.

Q44. What employment types can be validated through the DU validation service?

Employment associated with base, bonus, overtime, and commission income (non-military) is eligible for validation. Borrowers with self-employment will not have employment validated for their self-employment, but may have employment validated for the non-self-employment source of income.

Q45. How can I obtain employment validation, for non-self-employed borrowers, through the DU validation service?

• Order a income and employment verification report, or an employment verification report, or an asset verification report (if opting in of employment verification using this type of report) from an approved vendor, then
• Submit the casefile to DU
• If DU issues the message stating that employment has been validated, then close the loan by the ‘close-by’ date reflected in the DU message.

Q46. Can borrowers on temporary leave be validated for employment status?

No. Certain employee status codes that may indicate temporary leave (e.g., sabbatical), will not be considered active employment, and therefore will not be validated.

If the lender confirms the borrower is currently on temporary leave, the lender must consider the borrower to be ‘employed,’ however, additional documentation requirements apply that are not supported by the DU validation service. Refer to the Selling Guide for details.

Q47. If income is validated by DU, does the lender still need to obtain a Verbal Verification of Employment per Selling Guide B3-3.1-07, Verbal Verification of Employment?

The lender is still required to obtain a verification of employment within ten calendar days before loan closing in accordance with the Selling Guide. Employment validation through DU can fulfill the requirement to obtain a verbal verification of employment if obtained within ten calendar days of closing if using an income or income and employment verification report, or within 15 calendar days if using an asset verification report. The lender must comply with all DU messages, including ensuring the loan closes by the “close-by date” stated in the DU employment validation message.

Q48. Can verification of income also include verification of employment?

 Yes. A lender that is signed up for income validation will automatically see the employment validation messaging in DU. DU can use either a income and employment verification report (VOIE) or a employment verification report (VOE), or a 12-month asset verification report to validate employment through the DU validation service. When employment is validated, the loan must close within ten calendar days of the report date for an income or employment verification report or within 15 calendar days using a 12-month asset verification report. If an income verification report was used for income validation early in the process and the lender also received employment validation but is not able to meet the initial ten-day timeframe, the lender will also have to order an employment verification report (or an updated income verification report) ten calendar days prior to closing and resubmit the casefile to DU in order to obtain the updated employment validation.

Q49. If a lender received employment validation in DU and closed the loan within the “close-by” date in the DU employment validation message, does the lender receive enforcement relief of representations and warranties even if it is later discovered that the borrower was no longer employed at the time of closing?

If employment has been validated and the lender closed the loan within the date outlined in the DU message, the lender will receive enforcement relief of the representation and warranty that the borrower is employed as of the closing date, provided the lender had no knowledge of the change in the borrower’s employment status. If the borrower disclosed (or the lender became aware) prior to closing that the borrower was no longer employed, this represents conflicting information that would have required additional investigation by the lender, and the enforcement relief would no longer apply to the prior employment (which may have an impact on any income validation associated with that employment).

Q50. If the employment validation expires because the loan did not close by the required close date, what options are available to revalidate employment?

• To re-validate employment and obtain updated income validation: The lender can choose to reorder a income and employment verification report , or an employment verification report, or a 12-month asset verification report and resubmit the casefile to DU. If DU is able to validate employment, DU will re-issue income and employment validation messages, including updated close-by dates, which apply as a result of the updated report.
• To re-verify employment and retain income validation: If the lender does not obtain an updated third-party verification report and/or does not resubmit the casefile to DU in order to update employment and income validation through the DU validation service, the lender must follow the standard Selling Guide requirements for verifying employment prior to delivering the loan to Fannie Mae.

Q51. If the lender chooses to re-verify employment (versus re-validate employment through the DU validation service) will the loan retain income validation?

Income validation is retained provided (1) the lender follows the standard Selling Guide requirements for verifying employment (2) the borrower remains employed with the same employer for which income is validated (3) the loan file does not contain conflicting and contradictory information related to the borrower’s employment status or income from this employer and (4) the loan closes by the income validation close by date identified by DU.

Q52. Does DU’s assessment of the vendor report, including any Employer Disclaimer information reflected on the report, relieve the lender of the responsibility to assess the verification report for inconsistencies?

No. Similar to credit report information, the lender remains responsible for reviewing the information in the loan file, including the information on all vendor reports, for inconsistencies or discrepancies. The lender must investigate any inconsistent information and resolve any conflicts. In some cases, this may mean obtaining additional documentation to fulfil the verification of employment requirement.

Q53. In the DU Validation Service Reference Guide, it states when using an income and employment verification report, if DU does not validate employment, the associated income will also not be validated. How does this impact validation for self-employment income?

Self-employment income validation does not require associated employment validation, as self-employment is not one of the employment types eligible for validation. See the DU Validation Service Reference Guide for more information on how self-employment income is validated.

Q54. What happens if the employer name entered into DU does not match the name listed on the vendor’s report?

DU will not validate employment unless the employer name entered into DU matches the employer name listed on the vendor’s income and employment verification report, or in the transaction descriptions in a 12-month asset verification report. If the employer name is reflected differently on the verification report than on the application but it is the same as the borrower’s employer (for example: “Federal National Mortgage Association” vs. “Fannie Mae”), the loan officer can change the employer name entered into DU to match what is listed on the vendor report and run DU. If the employer name in DU does not match the employer name or transaction description on the vendor report, DU Findings will issue a message indicating the reason “Employer name in VOE doesn’t match employer name in DU" or "Unable to match income information on asset report to borrower or employer name."

Q55. What is Day 1 Certainty?  

Day 1 Certainty for data validation is the confidence that Fannie Mae will not enforce certain representation and warranty obligations for loan components that have been validated by the DU validation service. 

In general, when DU has validated one or more loan components, Fannie Mae will not enforce representations and warranties for:  

• Income calculation – the calculation of the income amount used to qualify the borrower when that income is able to be validated by the DU validation service (per borrower, per income-type) 

• Employment status at closing – the borrower’s employment, through the time of closing, that the employer attested to on the loan application (per borrower, per employer) 

• Asset calculation – the accuracy of the amount of assets relied upon to satisfy the total amount of assets required to be verified by DU (loan-level) 

• The integrity of the data provided on the eligible report obtained from the report vendor 

Q56. What are the lender’s additional responsibilities when a component has been validated? 

To preserve the representations and warranties enforcement relief, the lender additionally must take the following steps: 

• Confirm that the verification report matches the borrower, including the employer name and that the borrower is the account holder (for asset 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; and 

• Comply with all DU messages and document the file accordingly. 

Q57. How does Day 1 Certainty 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 calculation of the borrower’s income or assets, the integrity of the data in a vendor’s report, or the borrower’s employment status at time of closing, Fannie Mae will not pursue repurchase (or a repurchase alternative) if that particular component was validated by the DU validation service (assuming the lender met all requirements related to the DU validation service and there was no breach of life-of-loan representations or warranties). 

Q58. How does Day 1 Certainty apply to the 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 as part of the DU validation service, the life-of-loan representations and warranties continue to apply.  

Q59. How does representations and warranties enforcement relief related to DU validation service apply to loans with mortgage insurance? 

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

Q60. What impact does the DU validation service have on Fannie Mae’s requirements for lenders’ Quality Control processes? 

For loans with a component validated by the DU validation service, the lender is not required to re-calculate the validated income or assets as part of its pre-funding Quality Control (QC) review or re-verify or re-calculate the validated information as a part of the post-closing QC process. 

The lender’s QC process should continue to:  

• Include a review of the file as a whole and ensure the information it enters in DU is appropriate based on its review and investigation of any inconsistent or contradictory information in the loan file and the vendor report.  

• Ensure compliance with the DU messages and that the appropriate required documentation is in the file. 

• When an asset verification report is used for income and employment verification, ensure access to the 12+ months of transaction data is retained. 

• Re-verify in accordance with the Selling Guide any components of the loan that were unable to be validated or were not validated by DU. 

Q61. How can a ensure the Selling Guide requirements are met regarding retaining access to the asset verification data file?

Per the Selling Guide section, when income and/or employment is validated using an asset verification report, lenders are required to retain access to the full set of data (12+ months of transactions) used by DU for validation purpose. This can be done by:

• Storing a copy of the data file or the full report from the asset verification vendor in the loan file (if the report contains 12 or more months of transactions),

• Collaborating with the report vendor to retain access to the data file,

• Ensuring a member of your organization has access to the Asset Data Access Report in Fannie Mae Connect and can download the data file as needed. Note: access to this report should only be made available to a limited number of users in your organization on an as-needed basis.

Q62. What if the lender outsources post-closing QC processes? 

Lenders that use an outsourced third-party vendor for quality control should work closely with the vendor to make sure that any QC efficiencies are only applied on the loans with the appropriate DU messages – and that the vendor still performs reverification where it is required.  

Q63. What action should a lender take if they discover data discrepancies or find data within a vendor report that just doesn’t make sense?  

Lenders should report data issues to the Day 1 Certainty Data Discrepancy mailbox. The mailbox is used to gather data discrepancies that lenders may identify as part of their due diligence of loans validated through the DU validation service. This information will be used by Fannie Mae to identify gaps with data quality and to improve our models.   

Q64. Why would a lender not see DU validation messages? 

A lender must enter the reference number and vendor in the verification reports section before submitting to DU, or, for the automated Equifax/The Work Number process, register with Fannie Mae to use Equifax/The Work Number reports. If these steps are taken, the lender should see messages for casefiles submitted for validation.  

If you have taken these steps are still having trouble, please contact your account team or call 1-800-2FANNIE (1-800-232-6643), Option 1 (technology support). 

Q65. If a lender ordered and received a verification report from a vendor for the borrower but the DU validation service was not able to validate, what might have happened? 

Some information may not qualify for validation. For example, if a borrower has been employed less than 12 months, a vendor may issue a report for that borrower that the lender determines to be acceptable income documentation. However, DU will not validate the income provided because DU requires at least 12 months of income for the validation service to run. The 12-month minimum requirement is specific to the validation service – not a change in overall Selling Guide policy.  

See the DU Validation Service Reference Guide (requires DU, DO, or Fannie Mae Connect credentials) for more details. 

Q66. What does it mean if employment was not validated for a borrower due to Employer Disclaimer Information?  

At times, the Employer Disclaimer section of a verification report contains information indicating that the information on the report may not accurately reflect the borrower’s employment status (employment status may remain ”active” for some period of time after termination, for example). DU looks for combinations of key text in the disclaimer section and will not validate employment if certain text is present. 

Q67. Employment was not validated for a borrower because the employer name on the verification of employment report does not match the employer name in DU. The discrepancy is really just a data-entry error – the employer name is reflected differently on the verification report than on the application (“Federal National Mortgage Association” versus “Fannie Mae,” for example). Does this mean this employment record cannot be validated? 

If, after performing the appropriate due diligence, the lender determines that the reason for the difference in employer name is purely data entry and the employers are, in reality, the same, the lender may update the employer name in DU to match the name as it appears on the verification report and resubmit to DU. 

Q68. Are DU validation service vendors required to meet prescribed information security standards? 

Fannie Mae requires DU validation service vendors to undergo an information security review before becoming a DU validation service report provider. Lenders, however, must conduct their own information security reviews to ensure that the vendors they choose meet their requirements. 

Q69. Does Fannie Mae set the terms under which DU validation service vendors provide services to lenders? 

No. Lenders are solely responsible for negotiating the terms governing the validation services provided by DU validation service vendors, including borrower credential and data retention periods, frequency of use of credentials to access borrower data and other privacy protections. Fannie Mae encourages lenders to ask questions of vendors to ensure that the vendors you choose provide the services, privacy protections, and disclosures that best fit your expectations, as well as those of your borrowers. Lenders may wish to inquire as to whether vendors intend to use customer data outside of the mortgage transaction. Lenders are also reminded that some DU validation service vendors use third parties to obtain the data and should ensure that whatever terms they negotiate apply equally to any such third party.  

Q70. What type of borrower consent is required? 

The type of borrower consent required is determined by the lender (working with their legal counsel) and/or the requirements of the report vendor. The lender is ultimately responsible for ensuring the adequacy of the consent for the transaction. 

Q71. What information should borrowers be told before providing their consent and log-in credentials? Who is responsible for providing this information? 

Before providing their consent and credentials, borrowers should be informed to the extent deemed appropriate: 

• who will have their credentials and data; 

• how their credentials and data will be used; 

• if and when their credentials and data will be deleted; 

• how to revoke consent (such as by changing their credentials) and the consequences of revoking consent; and 

• who to contact if they have concerns about the DU validation service.  

The lender and the vendor must determine how best to communicate this information to the borrower. 

Q72. How long does Fannie Mae retain borrower log-in credentials? How long does Fannie Mae retain the data it receives? 

Fannie Mae does not receive or retain borrower log-in credentials. Fannie Mae uses a reference number provided by the lender to obtain data from the vendor. Fannie Mae currently retains the data received from DU validation service vendors for so long as is necessary for legitimate business purposes. 

Q73. Do all DU validation service vendors have the same privacy and breach policies? 

No. The DU validation service platform has a wide variety of vendors each with their own business model, which includes their policies on access, retention, deletion of borrower data and credentials, and breach response procedures. Lenders must conduct thorough due diligence to ensure the vendors they choose meet their needs and expectations.  

In 2023, new consumer privacy laws are or will be effective in California, Colorado, Connecticut, Utah, and Virginia.  How do these laws impact Day 1 Certainty and the DU Validation service? Recently enacted consumer privacy laws in these states grant consumers new rights concerning their personal data and impose obligations on businesses that collect and process consumer data. The laws also contain certain exemptions - e.g., for personal data that is covered by certain other privacy laws, such as the Fair Credit Reporting Act (FCRA) and the Gramm-Leach Bliley Act (GLBA). Lenders should consult with their legal and compliance departments for guidance on how these laws impact consumer data.

Q1. How does DU validate income and employment using an asset verification report?

The new capability compares borrower income (wage and non-wage) and employment information within the loan application against deposits in an asset verification report’s transaction history. When a recurring deposit can be matched to a borrower’s income source, DU will validate the income, provided that the income value calculated by DU supports the income provided by the lender on the loan application. Employment may also be validated when income can be calculated for the borrower’s wage income even if the calculated amount cannot be used to validate the lender provided income amount.

When income or employment is validated using an asset verification report, lenders receive relief from enforcement of related representations and warranties if the loan closes by the date specified in the DU messages and all other conditions of the DU validation service are met.

Q2. Why is opt-in necessary?

The functionality to validate income and employment using asset account data is being offered as an opt-in solution to ensure lenders are in control of rolling out the technology when they are ready. The offering is best suited for lenders who leverage asset verification reports early in their loan origination process and who can incorporate the validation achieved within their loan fulfillment process.

Q3. Are there additional considerations for participating?

In addition to the benefits achieved from digital validation (operational efficiencies and time savings), it is important for a lender to consider the following:

• Data Provider Setup: Participating lenders must have entered into a contract for the services provided by an authorized report supplier or report distributor.
• Data Requirements and Verification of Ownership: Lenders must request, from the report supplier, asset verification reports that contain a minimum of 12-months of account history for at least one borrower identified within the loan application.
• Determination of Income: A lender remains responsible for determining a borrower’s income. This includes entering the income type and the amount of income into the loan application.
• Regulatory Compliance: 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 and the Qualified Mortgage Rule. As with all loans, we provide no assurance to lenders that the loans meet these requirements, or any other obligation under applicable law. •
• Length of Asset Verification Report and Data Sent to DU: A lender may receive the full asset verification report (including the entirety of the data provided to DU) or a shorter history (30- or 60-days), from their third-party vendor. In any case, lenders are required to have access to the larger data set referenced to DU at the time of origination.
• Asset Verification Report Retention Requirements: Lenders are responsible for retaining the asset verification report containing all data provided to DU in the loan origination file or meeting alternative requirements, outlined in the Selling Guide, for retaining access to the asset account data.
• No Selective Application on Casefile Level: If a lender opts-in to the capability, then DU will attempt to evaluate all casefiles referencing an asset verification report for income and employment validation. A lender cannot selectively apply this feature on a casefile basis.

Q4. Are all loans eligible for income and employment validation using an asset verification report?

To be eligible for income and employment validation using asset verification reports, loans must meet the following criteria:

• The income type must be an eligible income type for validation
• Asset account data must be sourced from a valid account type (checking or savings account) and contain a minimum of 12-months of account history

Q5. What if a lender does not want to take advantage of income and employment validations on a particular casefile?

Lenders always maintain the option to document income and employment following any acceptable methodology outlined within the Selling Guide, even if income and employment validations are achieved using an asset verification report.

Q6. How do loans originated by a Third-Party Originator leverage asset verification reports for income and employment validation?

Mortgage brokers and correspondents can receive income and employment validation related to asset verification reports.

Mortgage brokers can receive the validation if their sponsoring lender is activated for the capability. Validation, however, will not be provided for loans that are in a “preliminary” status. Correspondents who are also Fannie Mae sellers can request to be activated for validation of income and employment from an asset report.

Q7. Can a lender deliver a third-party originated loan with income or employment validated using an asset verification report?

Yes. Lenders who deliver loans to Fannie Mae that were originated by their correspondents do not need to be activated for the capability to deliver loans to Fannie Mae that have received income and employment validation from asset verification reports.  They are however, required to meet all Selling Guide requirements related to loans validated through the DU validation service, including the requirement that they maintain access to the asset report data that was used by DU to provide the validation.

Q8. What are the Age of Document requirements for an asset verification report if used to validate income?

For DU to validate income and employment, the asset verification report information effective date (Current As of Date) cannot be more than 45 days prior to the DU casefile creation date. When income or employment are validated, DU will provide a ‘close-by’ date in the DU message. For income validation, this will be 4 months from the report date. For employment validation, this will be 15 days from the report date.

Note: To be eligible for enforcement relief of income representations and warranties, the loan must close by the ‘close-by’ date specified in traditional DU income verification messaging.

Q9. Is a Special Feature Code (SFC) required for loans with income or employment validation at delivery?

No, a lender does not need to assign a SFC to loans that are delivered to Fannie Mae when income or employment are validated using an asset verification report.

Q10. Can lenders obtain details about the logic used by DU to validate income and employment?

The Desktop Underwriter® (DU®) validation service Reference Guide provides additional details on the logic employed within DU to validate income, employment, and assets. Lenders can access this guide on our website, using their Fannie Mae login credentials for DU, Desktop Originator® (DO®), or Fannie Mae Connect™.

Q11. What is an eligible asset verification report?

The asset verification report must:

• Be obtained from an approved third-party asset verification report vendor; a list of approved vendors is available on Fannie Mae’s website
• Contain data from a borrower’s checking or savings account (or both)
• Be no older than 45-days on the casefile create date, and
• Meet the minimum asset verification report duration requirements for the income type

Q12. What is the history requirement for asset verification reports used by DU for income and employment validation?

Lenders must order an asset verification report covering a minimum of 12 consecutive months of asset account data referencing the checking or savings accounts where the borrower’s income is directly deposited. DU will determine the minimum number of deposits required to validate income and employment; this may differ by income type.

Q13. What are lender requirements related to asset data from an asset verification report vendor?

The data DU receives may differ from the data a lender receives from an asset verification report provider. For the purposes of income and employment verification from an asset verification report, the lender must have access to all the data submitted to DU during the origination process, regardless of what the lender receives from the asset verification report vendor.

Lenders who have originated casefiles that are later delivered to Fannie Mae where an asset verification report was submitted to DU can utilize a Fannie Mae utility to download and retrieve the asset verification report data. This capability is offered to the originating lender (i.e., the entity whose Institution ID number was used to submit the loan to DU) to assist them in support of their obligation to retain access to the asset account data if using an asset report to document income or employment.

Q14. What are the requirements for Lenders to review the asset verification report?

When an asset verification report is used to validate income or employment, the lender must review the report to confirm that a borrower on the application is listed as an owner of the asset account. The lender must also review the report to identify any contradictory or conflicting information (which, if identified, it must investigate and resolve appropriately).

For Fannie Mae’s underwriting purposes, a lender is responsible to review an asset report for the period required for asset verification (30 or 60 days), or for 30 days if no asset documentation is necessary for the transaction. The data in the report obtained and reviewed by the lender will likely be a subset of the data sent to DU, which may cover 12 months or more. A lender is required to maintain access to the larger data set reference to DU.

Q15. What income types are supported for validation?

Wage-related income corresponding to the following DU income-type fields are eligible for validation:

• Base,
• Bonus,
• Overtime, and
• Commission

Non-wage income corresponding to the following DU income type fields are eligible for validation:

• Social Security/Disability,
• VA Benefits (non-educational),
• Retirement (Pension),
• Long-term Disability,
• Child Support, and
• Alimony

Q16. What are the lender’s responsibilities with respect to determining qualifying income and entering on a loan application?

A lender remains responsible for determining a borrower’s income. This includes entering the income type and the amount of income into the loan application.

Q17. Is self-employment income eligible for validation?

Self-employment income is not eligible for income validation using an asset verification report. For a borrower with self-employment income, other income not related to their self-employment may be eligible.

Q18. How is variable income (i.e., bonus, overtime, commission) considered when income is validated using an asset verification report?

DU reviews the recurring direct deposits within the asset verification report and often they include amounts that reflect variable income that a borrower may receive related to bonus, overtime, or commission income. These deposits are considered and incorporated within DU’s calculation of an income amount used to support validation. DU assesses both stable and variable income for validation on an income-source basis. Validation will be provided for all income types from an income source when the calculated value supports the income amounts entered in DU.

Q19. What happens if DU calculates a lower income value than the income that was reported on the loan application?

When DU calculates an income value that does not support what is represented on the loan application, DU will issue a message indicating that the income value found is insufficient to validate the reported income and will provide a message indicating documentation that is required. Employment validation may still be provided if all related requirements are met.

Q20. What happens if multiple verification reports (e.g., asset verification report and a VOI/VOE or Tax Transcript report) are referenced to DU for the same casefile?

A lender can reference multiple verification reports on the loan application submitted to DU for the purposes of validating borrower income. The DU validation service is designed to review all reports that are referenced. When the referenced reports validate different income sources identified for the borrower, DU messages will be returned related to each source of income and the corresponding report used to provide validation. When multiple reports are provided that verify the same source of income for a borrower, the DU validation service will employ waterfall logic and use the verification report that fully validates the income source and that provides the longest close-by-window for the validation. The verification report used to support validation will be identified in the DU message.

Q21. What are some common reasons why income may not be validated from an asset verification report?

When an asset verification report is referenced to DU for income verification, the DU validation service will review the asset report for recurring direct deposits that it can attribute to a borrower’s income. Common reasons why DU is unable to validate income include:

• The asset verification report does not contain at least 12-months of transaction history
• There are no direct deposit streams that can be attributed to the borrower’s income source
• The direct deposits that can be identified do not meet the regularity and recency rules used by DU
• The income value calculated by DU does not support the amount on the loan application
• The loan does not meet the loan eligibility requirements

Q22. Is it possible for income to be validated using an asset verification report, but not employment?

No, employment must be validated in order for the associated income to be validated.

Q23. Can asset verification reports validate non-wage income that may be non-taxable and grossed up by the lender in accordance with the Fannie Mae Selling Guide?

Yes. The DU validation service considers the non-taxable nature of an income type in its income value calculations. Lenders remain responsible for documenting the non-taxable nature of income in accordance with the Selling Guide.

Q24. Can income be validated using an asset verification report if a borrower has been working at their employer for less than 12 months?

Yes, DU can validate income for a borrower who has recently switched jobs and has been employed by their current employer for less than 12 months provided that a previous job for the borrower is documented within the loan application. In these instances, DU will look for a 12-month history of recurring deposits within the asset verification report that it can attribute across the borrower’s current and previous employment. Income from the current employer may be validated if the calculated income value is sufficient to support the income declared for the borrower.

Q25. If employment is validated using an asset verification report, when must the loan close by to be eligible for relief of enforcement of employment representations and warranties?

To be eligible for relief of enforcement of employment representations and warranties, the loan must close by the ‘close-by’ date specified in the DU message. This date is calculated by DU and is 15-days from the asset verification report date, or up to the next expected deposit date for a borrower’s job (whichever is greater).

Q26. Is a 10-day verbal Verification of Employment (VOE) required if employment is validated using an asset verification report?

No, when DU provides validation of employment using an asset verification report, the lender does not need to order a VVOE if the loan closes by the close-by-date specified in the DU message.

Q27: What if employment is validated using an asset verification report but the loan will not close by the “Close-by Date” provided in the DU employment validation message?

If employment is validated but the loan will not close by the “Close-by Date” the lender must reverify employment as required under B3-3.1-07, Verbal Verification of Employment. The lender may choose to do this in one of several ways:

• Obtain an updated asset verification report and resubmit to DU – this option will update the asset verification report for all aspects of the casefile that rely on that report, including asset validation and income validation. Validations will be refreshed and close-by dates will be re-calculated based on the new asset verification report date. If employment is validated a new close-by date will be specified in the DU verification messaging.
• Obtain a VOE report and resubmit to DU. If the DU validation service is able to validate employment using the VOE report, an employment validation message will be provided with a new close-by date based on the VOE Report Date.
• Obtain a re-verification of employment through any non-digital method permitted in the Selling Guide. Because employment validation has expired and re-verification under this option is outside of the DU validation service, relief from enforcement of employment related representations and warranties will not apply. 
• Obtain a supplemental deposit-based verification report from an approved asset verification report vendor. These reports can be referenced to DU for the purpose of extending a borrower’s employment validation that was previously validated using an asset verification report. Supplemental deposit-based verification reports contain the up-to-date histories of recurring deposits made to a borrower’s account, and provided that there is evidence of the most recent expected deposit from the borrower’s employer, DU will extend employment validation and provide an updated close by date within the verification messaging. Employment validation achieved using these supplemental reports will receive relief from enforcement of related representations and warranties if the loan closes by the date specified in the DU messages and all other conditions of the DU validation service are met.
  Alternatively, lenders may manually review this report to confirm the pattern of receipt of direct deposits supports on-going employment with the employer that was initially validated by the DU validation service. This option is available only in cases where employment was initially validated from an asset verification report. Because employment validation has expired and re-verification under this option is outside of the DU validation service, relief from enforcement of employment related representations and warranties will not apply.

Q28: What is a ‘supplemental deposit-based verification report?

Many of the authorized report suppliers offer reports that are supplemental to an asset verification report submitted to DU and that are intended to be used for the express purpose of satisfying a lender’s VVOE requirements 10 days prior to loan closing. Lenders may manually confirm that evidence of the most recent deposit related to a borrower’s employment is present within the report and that it matches the direct deposit description from the original asset verification report as referenced in the DU message. This manual employment confirmation process (outside of DU) will not result in relief from representations and warranties. For more information regarding deposit-based verification reports, a lender should contact their authorized report provider.

Note: These reports focus on recurring deposits that occur within the borrower’s account, but do not contain the deposit amounts or the account balances associated with the account. By limiting this information, a lender does not need to consider the report for the verification of income or assets.

Q29. What occurs if both an asset verification report and a VOE report are referenced on a loan application for employment validation?

A lender can reference multiple verification reports on the loan application submitted to DU for the purposes of validating borrower employment. The DU validation service is designed to review all reports that are referenced. When the referenced reports validate different employers identified for the borrower(s), DU messages will be returned related to each employer and the corresponding report used to provide validation.

When multiple reports are provided that validate the same employment for a borrower, the DU validation service will employ waterfall logic and use the verification report that can validate employment and that provides the longest close-by-window for the validation. The verification report used to support validation will be identified in the DU message.

Q30. Can employment be validated through an asset verification report without validating income?

Yes. When employment can be validated and an income amount can be calculated and attributed to a borrower’s wage, employment validation will be returned by DU. If the income amount calculated by DU can support the income declared for a borrower on the loan application, income validation will also be returned. If, however, the income value calculated by DU does not support the income on the loan application, then income validation will not be provided, and only employment validation will be returned.

For all asset validation questions, please reference the Asset Validation section of the DU Validation Service FAQ.

Please reference the Privacy and Information Security section of the DU Validation Service FAQ.