Although Freddie Mac has seen improvements in credit quality over the last few months, we are still seeing a number of deficiencies in the underwriting process. To address this concern, we are issuing Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-18 to help you enhance your underwriting processes and controls, and mitigate the risk of defaults and repurchases.
With this Guide Bulletin, we are announcing changes to our underwriting requirements, providing additional guidance and emphasizing existing requirements for underwriting a borrower and appraisals, and sharing underwriting best practices that will help strengthen the quality of the mortgages you deliver to Freddie Mac.
Today's Guide Bulletin is aligned with our efforts to work with you to rebuild a strong mortgage finance system. By promoting responsible lending standards that withstand market fluctuations, we can work to ensure that you and your borrowers are successful throughout the entire life of a mortgage.
The revised underwriting requirements announced in today's Guide Bulletin are effective for all mortgages with applications dated on or after October 1, 2009, and settlement dates on or after January 1, 2010. While the new requirements are not effective until October, we strongly recommend that you begin underwriting mortgages with these new requirements to help strengthen your origination processes and enhance the quality of the mortgages you deliver to Freddie Mac.
We encourage you to thoroughly review the Bulletin to learn more about the requirement changes and best practices.
Underwriting appraisals. We recognize the challenges that current market conditions pose in connection with determining accurate property values. To help you address these challenges, we strongly recommend that you become familiar with our appraisal requirements detailed in Guide Chapter 44 and the best practices outlined in today's Bulletin.
Our reminders include information about selecting qualified appraisers, maintaining qualified staff to underwrite appraisals, and ordering appraisal reviews. We recommend the use of Home Value Explorer®, Home Value Calibrator® or other validated and tested automated valuation models (AVMs), as well as other collateral valuation tools, to assess the quality and accuracy of appraisals.