source:
  type: guide
  id: fnma-sel-d1-1-01
  authority: Fannie Mae Selling Guide D1-1-01 — Lender Quality Control Programs, Plans,
    and Processes
  description: Fannie Mae Selling Guide D1-1-01 — Lender Quality Control Programs,
    Plans, and Processes.
  coverage_tier: operative
obligations:
- id: fnma-sel-d1-1-01-full
  canonical_id: fnma-sel-d1-1-01-full
  section: Fannie Mae Selling Guide D1-1-01 — Lender Quality Control Programs, Plans,
    and Processes
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide D1-1-01 — Lender Quality Control Programs,
      Plans, and Processes
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'D1-1-01, Lender Quality Control Programs, Plans, and Processes
      (04/01/2026) Introduction This topic provides an overview of Fannie Mae’s requirements
      related to the lender’s ongoing assessment of its loan origination activities
      and associated processes. (QC requirements that relate to the lender’s servicing
      activities are described in the Servicing Guide.) This topic also contains information
      on the elements required for a QC program, including: Overview QC Plan Contents
      Quality Standards and Measures QC File Review Overview Selection of Loans for
      QC Review QC Review of Third-Party Originations Reporting and Corrective Action
      Self-Reporting to Fannie Mae Record Retention and Response to Fannie Mae Requests
      Audit Review of the QC Process Published May 6, 2026 1037 Overview An eﬀective
      QC program is a key component of the lender’s overall control environment as
      quality risk can create ﬁnancial impacts for the lender and may also aﬀect a
      borrower''s sustainability. The QC program deﬁnes the lender’s standards for
      loan quality, establishes processes designed to achieve those standards, and
      mitigates risks associated with the lender’s origination processes. Fannie Mae
      requires the lender to develop and implement a QC program that provides a structure
      for identifying the deﬁciencies in the loan manufacturing process and for implementing
      plans to quickly remediate those deﬁciencies and underlying issues. The lender’s
      QC program must include a written QC plan that outlines requirements for validating
      that loans are originated in accordance with the lender''s established policies
      and procedures. All loans and the QC plan must comply with applicable laws as
      provided in A3-2-01, Compliance With Laws; comply with the Selling Guide and
      the Lender Contract, and be in all respects eligible for delivery to Fannie
      Mae; and guard against fraud, negligence, errors, and omissions by oﬃcers, employees,
      contractors (whether or not involved in the origination of the loans), brokers,
      borrowers, marketing partners, appraisers, vendors, and others involved in the
      mortgage process. Lenders that fail to maintain an eﬀective QC program will
      be in breach of their contractual obligations with Fannie Mae. QC Plan Contents
      The lender’s QC program must include a documented QC plan that establishes standards
      for quality and incorporates systems and processes for achieving those standards.
      The QC plan, at a minimum, must contain the following information. ✓ Lender’s
      QC Plan Requirements Quality standards and measures, including: • a general
      overview of the QC philosophy; • QC plan objectives; • speciﬁc risks to be measured,
      monitored, and managed; and • methods used to ensure the QC program is an independent
      and unbiased function including program governance (targets, sampling) and process
      execution Procedures: detailed operating and reporting procedures for all employees
      involved in or aﬀected by the QC process Published May 6, 2026 1038 ✓ Lender’s
      QC Plan Requirements QC ﬁle review process: a process for performing prefunding
      and post-closing QC ﬁle reviews, including at a minimum: • conﬁrming compliance
      with the Selling Guide and the Lender Contract, and that the loans are in all
      respects eligible for delivery to Fannie Mae, and • conﬁrming compliance with
      applicable federal, state, and local laws and regulations A prefunding QC ﬁle
      review is an evaluation of a sample of loans prior to closing or, in the case
      of loans acquired from third parties, prior to acquisition. Sample selection
      process: a process for identifying a representative sample of loans for QC ﬁle
      reviews using both random and discretionary selection processes that include
      loans originated • across all applicable production channels (for example, retail,
      correspondent, and third-party originators); • under all mortgage products (for
      example, ﬁxed-rate, ARM, and special or niche programs); and • using all underwriting
      methods (manual and each automated underwriting system) Reporting: written procedures
      for reporting the results of the QC ﬁle reviews, including: • the method of
      monthly reporting of review ﬁndings, • identifying critical components to be
      included in the reports, • distributing summary-level ﬁndings to management,
      • distributing loan-level ﬁndings to the business unit(s), speciﬁcally to parties
      within the business unit(s) responsible for resolution, and • maintaining accurate
      and detailed records of the results of the lender’s QC reviews Corrective action:
      a process for establishing a plan for speciﬁc corrective action to be taken
      when trends are identiﬁed through the QC review process, including summarizing
      the actions taken Quality control vendor review: a process for reviewing and
      reporting on the QC work performed by the lender’s QC vendors Record retention:
      a process for maintaining all QC-related documentation for at least three years,
      including records of QC ﬁnding and reports, loan ﬁles reviewed, reveriﬁcation
      documentation and tracking, and the location of such records QC program audit:
      an audit process to ensure that the lender’s QC policies, processes and procedures
      are followed by the QC staﬀ and that QC assessments and conclusions are recorded
      and consistently applied Published May 6, 2026 1039 Quality Standards and Measures
      The lender is responsible for the development and maintenance of standards for
      loan quality and for the establishment of processes designed to achieve those
      standards. To eﬀectively evaluate and measure loan quality standards, the lender
      must establish a methodology for identifying, categorizing, and measuring defects
      and trends against an established target defect rate. At a minimum, the lender
      must identify any loans with a defect (loans not in compliance with the Selling
      Guide or other related contractual terms and agreements) and establish a methodology
      by which all loans with identiﬁed defects can be categorized based on the severity
      level of the defect. The lender must deﬁne the severity levels appropriate to
      its organization and reporting needs; however, the highest level of severity
      must be assigned to those loans with defects resulting in the loan not being
      eligible as delivered to Fannie Mae. The lender must also establish target defect
      rates for its organization, reﬂecting its quality standards and goals. The establishment
      of a target defect rate is based on the lender’s post-closing random QC sample
      and enables the lender to regularly evaluate and measure progress in meeting
      its loan quality standards. Diﬀerent target defect rates may be established
      for diﬀerent severity levels; however, at a minimum a target defect rate must
      be established for the lender’s highest level of severity. A target defect rate
      must be established that is as reasonably low as possible. Once the targets
      are set, performance against the targets must be measured at least quarterly
      and reported to management. The target defect rates must be evaluated and if
      necessary, reset at least annually. The lender must document the rationale for
      establishing the target rate(s). Fannie Mae may assess how the lender’s chosen
      target defect rate aﬀects Fannie Mae’s risk and may provide input on a more
      appropriate target. QC File Review Overview As part of its QC program, the lender
      must establish processes to evaluate and monitor the overall quality of mortgage
      production through prefunding and post-closing ﬁle reviews. Loan ﬁle reviews
      must include, at a minimum, an assessment of compliance with Fannie Mae requirements
      by conﬁrming that the loan meets eligibility and underwriting requirements,
      the underwriting decision is adequately supported and all documentation required
      to support the decision is contained in the ﬁle, and the loan is secured by
      a property that provides acceptable collateral; and compliance with laws as
      provided in A3-2-01, Compliance With Laws. Selection of Loans for QC Review
      The lender’s QC process must include procedures for monitoring the quality of
      work performed by employees, contractors, vendors, and other third parties involved
      in loan origination, property appraisal, processing, underwriting, valuation,
      and closing functions. The lender must establish and document a process for
      identifying a representative sample of loans for QC ﬁle Published May 6, 2026
      1040 reviews for both prefunding and post-closing QC. While the prefunding QC
      process may utilize random or discretionary ﬁle selections, the post-closing
      QC process must include both random and discretionary ﬁle selections. Post-closing
      random sample loans must be full-ﬁle reviews; however, the lender must assess
      and understand the holistic risk inherent in its origination processes when
      determining the appropriate selection methodology and sample size for its prefunding
      and post-closing discretionary QC sampling. QC Review of Third-Party Originations
      When the lender sells loans originated by a third-party to Fannie Mae, the lender’s
      QC process must include additional steps to monitor the quality of third-party
      originations. The lender''s QC selection process must include a post-closing
      stratiﬁed random sample of third-party originations to ensure that those loans
      meet the lender''s standards for loan quality. The lender must select third-party
      originations for full-ﬁle review on at least a monthly basis. Additionally,
      the lender must supplement the random sample with discretionary targeted samples
      focused on third-party originations with elevated risks as determined by the
      lender''s oversight and control processes. Discretionary targeted samples may
      be full-ﬁle or component reviews and may be implemented in prefunding or post-closing,
      or in the case of loans acquired from third-parties, prior to acquisition. The
      lender must establish a process to provide monthly reports to management of
      third-party originations defects and ﬁndings. For additional information on
      QC reporting, see D1-1-03, Lender Quality Control Reporting, and for information
      on managing third-party originations, see A3-3-01, Outsourcing of Mortgage Processing
      and Third-Party Originations. For lenders with minimal volume of third-party
      originations (100 loans or fewer annually), the lender is not required to have
      a stratiﬁed sample or separate reporting. Reporting and Corrective Action QC
      reports are a critical component of the QC program and must be designed to enable
      management to evaluate and monitor the quality of the lender’s origination process
      compared to targets, identify speciﬁc loan-level issues and broad-based systemic,
      procedural, or operational issues, and address and remedy those issues to reduce
      the lender’s defect rate. The lender must report on the results of prefunding
      and post-closing QC ﬁle reviews to management on no less than a monthly basis.
      For additional information on reporting requirements, see D1-1-03, Lender Quality
      Control Reporting. When trends are identiﬁed through the review process, the
      lender must establish a written action plan for speciﬁc corrective action to
      be taken, including the expected resolution and the time frame for implementation
      and completion. Self-Reporting to Fannie Mae The lender must notify Fannie Mae
      within 30 days of the date of conﬁrmation that one or more defects identiﬁed
      Published May 6, 2026 1041 through the QC ﬁle review process results in the
      loan being ineligible as delivered to Fannie Mae. The "date of conﬁrmation"
      is the date the lender publishes its monthly post-closing report to management,
      and the loan is included in that report. Notiﬁcation must be made using the
      self-report functionality in Loan Quality Connect. When self-reporting to Fannie
      Mae, the lender must provide a summary of its ﬁndings and copies of the relevant
      documentation to support the ﬁnding. Examples of self-reporting include: The
      lender obtained tax transcripts revealing qualifying income was inaccurate and
      the loan is no longer eligible as delivered. The lender must provide copies
      of the original income documentation and the tax transcripts with its notiﬁcation
      to Fannie Mae. The collateral risk assessment process revealed the property
      is not in acceptable condition and the loan is no longer eligible as delivered.
      The lender must provide a copy of the collateral risk assessment with its notiﬁcation
      to Fannie Mae. The lender must maintain records of all loans self-reported to
      Fannie Mae and provide upon request. Record Retention and Response to Fannie
      Mae Requests The lender must retain all written and electronic records that
      are created as part of the QC review process for at least three years. These
      records include documentation of QC reports, QC review ﬁndings, reveriﬁcation
      documentation, successful rebuttal documentation, and documentation related
      to any corrective actions. The lender must provide Fannie Mae with a copy of
      its records upon request. Audit Review of the QC Process The lender must have
      an independent audit process to ensure that its QC process and procedures are
      followed by QC staﬀ, and that assessments and conclusions are recorded and applied
      consistently in the lender''s system of record. Results of the QC audit must
      be distributed to the lender''s management. The audit must assess whether other
      business units inﬂuenced or attributed to bias in the QC decision and include
      a written statement detailing the conclusions. Management must distribute the
      results to the appropriate areas within the organization and establish an action
      plan for remediation or changes to policies or processes, if appropriate. The
      lender must provide a copy of all audit materials for its QC process to Fannie
      Mae upon request. Recent Related Announcements The table below provides references
      to recently issued Announcements that are related to this topic. Announcements
      Issue Date Announcement SEL-2026-03 April 01, 2026 Announcement SEL-2025-04
      June 04, 2025 Published May 6, 2026 1042 Announcements Issue Date Announcement
      SEL-2024-06 September 04, 2024 Announcement SEL-2019-07 August 07, 2019 Announcement
      SEL-2019-01 February 06, 2019'
  judgment: false
