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Question: When a mortgage lender identifies trends through the quality control (QC) review process, what does the lender need to do in regard to establishing an action plan for corrective action as required by Fannie Mae?

Answer:

Fannie Mae requires monthly QC reporting to senior management to include an action plan for top defect trends. The action plan must indicate intended corrective actions, including expected resolutions and time frames for implementation. Corrective action and action plans are not optional and failure to maintain action plans serve as the root of MORA exam findings or denial of an application to be approved as an agency seller/servicer.

Fannie Mae explains in a recent Beyond the Guide publication from August 2023 (Guide) that corrective action is the process of identifying and fixing the root cause of a problem to prevent it from happening again. Action plans are tangible documents intended to identify the steps that need to be completed, track due dates and priorities, and record potential roadblocks and resources required.

Fannie Mae’s Guide provided the following step-by-step process guidance to assist lenders in creating action plans:

• Stage 1: Define the Problem. Gather and assess data; facts only rather than opinions or assumptions. State the problem specifically so that stakeholders in the organization understand the scope, the current impact, and future consequences of failing to solve the problem. Identify and activate responsible parties: stakeholders and subject matter experts.

• Stage 2: Root Cause Analysis. The process of discovering the root cause of a problem to identify appropriate solutions. This involves data collection, recognizing that there are technical (i.e. loan level data in the loan origination system), human and process components. Focus on gathering and assessing data from multiple sources, as well as by direct observation of processes. Work with the data obtained to glean useful information: why is this issue happening? Keep asking “why” until to get to the root cause of the issue. Fannie Mae indicates stopping too soon could prevent a lender from finding the true root cause.

• Stage 3: Design Solutions. Develop potential solutions. Assess how each solution relates to the root cause(s). Determine the feasibility of the solutions for prioritization and implementation. All business stakeholders and subject matter experts should bring an open and creative mindset to the task.

• Stage 4: Establish and Execute Solutions. Prioritize solutions for implementation and establish an implementation plan. Track solutions in your action plan.

• Stage 5: Test and Evaluate Solutions. Effective problem-solvers create testing plans before implementing solutions. Testing plans establish the testing parameters, define success measures, and align resources where needed. Leveraging a testing plan will help lenders align their project goals with their strategic objectives and provide a clear way to track and communicate progress and achievements.