For most investors participating in Third-Party Originations, it’s essential to have a process in place to assess the risk associated with the originator. Fannie Mae outlines their expectations in their seller guide, and meeting these standards is critical for passing Fannie’s MORA assessment.
Not all investors sell to Fannie or Freddie, so they may not be required to follow these guidelines. However, you may have reps and warrants to your investors that require you to implement a process for reviewing the risk of doing business with your originators.
When reviewing risk, here are the key factors to consider:
NMLS: Does the business have an active NMLS license? Are there any relevant regulatory actions to be aware of?
Bankruptcy: Does the business or its principal owners currently or historically have any bankruptcies?
Judgments: Does the business or its principal owners currently or historically have any judgments?
Liens: Does the business or its principal owners currently or historically have any liens?
Criminal Activity: Does the business or its principal owners currently or historically have any criminal activity?
Sanctions & Exclusionary Lists: Has the business or its principal owners been named in any exclusionary lists or faced sanctions?
Now, let’s discuss how your systems impact the intake and risk review process.
Manual PDF
If you’re handling applications manually, you’re likely pulling background checks and reviewing risk manually using a system like LexisNexis MIDEX or by checking individual sources.
Comergence
The benefit of Comergence is that it automatically checks NMLS and other sources to provide risk alerts within their system. While this can generate a significant number of alerts, it covers all major sources. However, the costs associated with this system can be relatively high.
Loanscape
We understand that not all investors have the same needs, and one size doesn’t fit all. We meet investors where they are. Some investors may only need a software platform, and for them, we offer our software-only solution. For those needing comprehensive risk alerts, we can provide a complete risk alert system tailored to their needs.
