GSEs Complete Latest Phase on UCD Critical Edits
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae and Freddie Mac have moved into the next phase of critical edits for the Uniform Closing Dataset (UCD).
Phase 3B, completed on November 6, transitioned the UCD critical edits from “warning” to “critical/fatal.” Fannie and Freddie published revised UCD FAQs to help with questions regarding UCD.
The transition to 3B means lenders must address quality issues for “fatal data points” before delivering loans to Fannie or Freddie.
The UCD is a common industry dataset that allows information on the Consumer Financial Protection Bureau’s (CFPB’s) Closing Disclosure (CD) to be communicated electronically. It was developed by Freddie Mac and Fannie Mae at the direction of the Federal Housing Finance Agency (FHFA).
The GSEs announced in 2020 that they are converting certain data edits in their UCD collection solutions from “warning” to “critical/fatal.” The multi-year rollout is occurring over five phases. Each phase addresses data points that closely align with given sections of the CD.
The critical edits are a combined effort by Fannie and Freddie to improve data quality and consistency for single-family loans that the GSEs purchase.
The data edits was originally a four-phase approach. But in April 2023, the GSEs split Phase 3 into separate phases: 3A and 3B. Phase 3A was completed in May 2023.
Data included in Phase 3 included information related to loan costs, total closing costs, lender credits and other costs. The GSEs said more than half of the critical edits were included in May’s 3A phase, including all edits for the data points supporting Qualified Mortgage (QM) Short Reset adjustable-rate mortgages (ARMs).
Regarding the fourth and final phase, the joint announcement stated:
“Updated requirements for the UCD Critical Edits Phase 4 will be included in the UCD Specification update to be published in 2024 and the UCD Critical Edits Matrix for Phase 4. Lenders and software partners/TSPs can expect a transition period similar to that used for Phase 3. Lenders and software partners/TSPs should consider delaying work to comply with the UCD Critical Edits Phase 4 as currently published in the UCD Critical Edits Matrix. While the focus of the edits is expected to remain the same, the specific requirements may change.”
According to the FAQ information, the GSEs are collecting UCD data because it:
Helps enhance credit risk management with more data and better-quality data.
Provides important information to help increase our ability to detect fraud and misrepresentation at loan delivery.
Provides additional transparency into the mortgage loan transaction file to help assess whether the loan, as closed, meets the GSE’s eligibility requirements.
For more information on UCD, visit the Fannie Mae UCD page or the Freddie Mac UCD page.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
