Vendor and Third-Party Oversight

Question:

As a Fannie Mae Seller/Servicer, why is vendor oversight important and what should it entail?

Answer:

 

Fannie Mae requires its approved Seller/Servicers to have a vendor approval and management process. In addition, vendors and other third-party service providers deliver support for you and your clients and are, therefore, a representation of your brand.

Fannie Mae recently released several checklists as part of their Seller/Servicer Risk Self-Assessments, including one on Vendor and Third-Party Oversight. As a reminder of the importance of vendor oversight, Fannie Mae states, “It is critical that third-party relationships are managed in accordance with internal policies related to strategic, reputational, operational, transactional, credit, and compliance risks.”

It may be tempting to overlook the importance of vendor oversight since Fannie Mae’s checklist only includes 2 required items:

  • Processes and procedures for the approval of vendors and other third-party service providers.
  • Processes and procedures for the management of vendors and other third-party service providers.

However, those two items are pretty all-encompassing – not to mention the multitude of recommended checklist items Fannie Mae included to help lenders ensure their vendors and third-party service providers are staying compliant. Furthermore, Fannie Mae is not the only agency that requires lenders to conduct oversight of their vendors. The OCC, CFPB, FDIC, in addition to most state regulatory agencies, have issued regulations and/or guidance regarding vendor oversight and management, making this a mission-critical function for lenders to maintain compliance at all levels.