Common use of Violation of Applicable Laws Clause in Contracts

Violation of Applicable Laws. ‌ A violation of any Applicable Laws by the PFI or Servicer will be considered an Event of Default. 60 MPF Announcement 2016-30 (12/22/16) 61 FICO® is a registered trademark of the Fair Xxxxx Corporation. 62 MPF Announcement 2017-13 (3/28/17) CHAPTER 8. QUALITY CONTROL PROGRAM‌ 8.1 MPF Bank’s Quality Control Review (3/28/17)64‌ The MPF Bank reserves the right to conduct a quality control (QC) review of any Mortgage Loan delivered under the MPF Program. The MPF Provider will review each Mortgage Loan selected for post-funding QC review to verify that it meets the definition of investment quality and complies with the Guides and the Applicable Agreements. The MPF Provider or its designee will send a request to the PFI in writing to submit specified Mortgage Loan Files to the MPF Provider or its designee. The PFI must send the requested information to the address contained in the letter. The files must be delivered within fifteen (15) days of the date of the letter. Failure to promptly forward a file selected for QC review may result in suspension of the PFI's origination or Servicing activities under the MPF Program. An offer by the PFI to purchase or repurchase the Mortgage Loan from the MPF Bank will not release the PFI from the requirement to submit the file for the QC review. After the QC review is complete, the PFI will be notified in writing of those Mortgage Loans with defects. No notice will be given relating to nondeficient Mortgage Loans. The PFI must remediate the defects within thirty (30) days from the date of the notification issued by the MPF Bank. Failure of the PFI to take corrective action within the required time may result in suspension of origination and/or Servicing as a PFI. Such suspension shall not limit the MPF Bank's prerogative to take other steps to enforce its rights or to protect its interests. The MPF Bank, at its sole discretion, may require the PFI to repurchase a deficient Mortgage Loan. In addition to other available remedies, the MPF Bank may demand repurchase when the PFI: • Does not submit Mortgage Loan documents support within the time provided; • Has not complied with any requirement, term or condition of the Applicable Agreement; • Has submitted a Mortgage Loan deemed to be other than of investment quality; • Has breached warranties or representations contained in the Applicable Agreements; • Has been unable to furnish satisfactory evidence of compliance with the Applicable Agreements; or • Has inappropriately underwritten and/or documented a Mortgage Loan at the time of origination. The PFI may appeal the MPF Bank’s repurchase directive if the PFI has additional supporting information and/or documentation that may affect the MPF Bank’s decision. 64 MPF Announcement 2017-13 (3/28/17) 8.2 Overview of PFI’s or Servicer’s Quality Control Program (5/1/19)65‌ PFIs must maintain a QC program for Mortgage Loans originated and serviced under the MPF Program. Each QC program must be designed to fit the specific needs of the individual organization’s operating environment. The QC program must ensure that Mortgage Loans delivered to the MPF Program: • Conform to the MPF Program Requirements; • Are of a quality acceptable to the MPF Bank and other institutional investors; and • Comply with the insurer and/or guarantor requirements. The PFI’s QC program must comply with the following requirements: • Be documented in writing; • Provide standard QC procedures for all personnel involved with or impacted by the QC process; • Include the performance of pre-Closing and post-Closing QC reviews; • Provide for the independence of the post-Closing QC process from the mortgage origination, processing and underwriting departments; • Include a process for identifying a representative sample of loans for QC review using both random and targeted selection processes that include loans from the following: o Originated through each applicable production channel (retail, correspondent, and/or third party originations); o Originated under all product lines; and o Originated using all underwriting methods (manual and AUS). • Have the capacity to monitor and evaluate the overall quality of mortgage production on a regular and timely basis including the reverification of Appraisals and appraiser review procedures or of the property value used to obtain an Appraisal Waiver offer; • Include procedures for the review of Early Payment Default (EPD) loans; • Comply with the specific requirements relating to sample size and selection, reverification, file review, Appraisal and appraiser review, and reporting; • Outline requirements for validating that Mortgage Loans are originated in accordance with established policies and procedures; • Include a process for reviewing QC work performed by vendors; • Include a process for maintaining records for three (3) years of QC findings and reports, loan files reviewed, and all related documentation. The location of the records must be documented; • Include an audit process to ensure the QC processes and procedures are followed by QC staff and that its assessments and conclusions are recorded and consistently applied; • Ensure the Mortgage Loans comply with the Guides, which includes compliance with Applicable Laws and Applicable Agreements, and are in all respects eligible for delivery under the MPF Program; and • Guard against fraud, negligence, errors, and omissions by officers, employees, contractors (whether or not involved in the origination of the Mortgage Loans) brokers, Borrowers, marketing partners, and others involved in the mortgage process; and • Have written procedures for reporting the results of the QC reviews that include the following: o Method of monthly reporting of review findings; o Identification of critical components to be included in the reports; o Distribution of loan-level findings to senior management; o Distribution of loan-level findings to the business unit(s), specifically to parties responsible for resolution; o Requirement for a timely response to and resolution of (or a plan for resolution of) findings identified in the QC review process; and o Maintenance of accurate and detailed records of the results of the QC reviews. The structure of the QC program should take into account: • The size and structure of the organization; • The qualifications of the staff; • The geographic areas of operations; • The branch structure; • The volume and types of mortgages originated; • The origination sources used; and • Any significant changes in the product lines, origination sources or production processes. Quality Standards and Measures (3/28/17)66‌ The PFI is responsible for developing and maintaining standards of mortgage quality and for establishing and designing a process to achieve those standards. The PFI’s QC Plan must include a general overview of their QC philosophy, plan objectives, and identification of the specific risks the PFI intends to measure, monitor, and manage. The QC Plan must establish a methodology for identifying, categorizing, and measuring defects and trends against an established target defect rate. At a minimum, the PFI must identify any Mortgage Loans with a defect (defined as a Mortgage Loan not in compliance with the Guides, Applicable Agreements, or Applicable Standards) and establish a methodology by which all Mortgage Loans with identified defects can be categorized based on the severity of the defect. The QC reports must define the severity levels that are appropriate for the organization and reporting needs. However, the highest level of severity must be assigned to those Mortgage Loans with defects resulting in the Mortgage Loan not being eligible as delivered under the MPF Program. The QC Plan must also establish a post-Closing target defect rate for its organization, reflecting its quality standards and goals. The establishment of a target defect rate is based on the post-Closing random QC sample. Different target defect rates may be established for different severity levels. However, at a minimum, a target defect rate must be established for the highest level of severity. Target defect rates are not required, although recommended, to be set for lower severity level post-Closing QC reviews, pre- Closing QC reviews, or targeted QC reviews. 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 rate(s) must be evaluated and, if necessary, reset at least annually. The PFI must document the rationale for establishing the target rate(s). The MPF Bank or the MPF Provider may assess how the chosen target defect rate affects risk and may provide input on a more appropriate target.

Violation of Applicable Laws. ‌ A violation of any Applicable Laws by the PFI or Servicer will be considered an Event of Default. 60 18 MPF Announcement 2016-30 (12/22/16) 61 FICO® is a registered trademark of the Fair Xxxxx Corporation. 62 19 MPF Announcement 20172016-13 30 (3/28/1712/22/16) CHAPTER 8. QUALITY CONTROL PROGRAM‌ PROGRAM‌ 8.1 MPF Bank’s Quality Control Review (3/28/17)64‌ Review‌ The MPF Bank reserves the right to conduct a quality control (QC) review of any Mortgage Loan delivered under the MPF Program. The MPF Provider will review each Mortgage Loan selected for post-funding QC review to verify that it meets the definition of investment quality and complies with the Guides and the Applicable Agreements. The MPF Provider or its designee will send a request to the PFI in writing to submit specified Mortgage Loan Files to the MPF Provider or its designee. The PFI must send the requested information to the address contained in the letter. The files must be delivered within fifteen (15) days of the date of the letter. Failure to promptly forward a file selected for QC review may result in suspension of the PFI's origination or Servicing activities under the MPF Program. An offer by the PFI to purchase or repurchase the Mortgage Loan from the MPF Bank will not release the PFI from the requirement to submit the file for the QC review. After the QC review is complete, the PFI will be notified in writing of those Mortgage Loans with defects. No notice will be given relating to nondeficient Mortgage Loans. The PFI must remediate the defects within thirty (30) days from the date of the notification issued by the MPF Bank. Failure of the PFI to take corrective action within the required time may result in suspension of origination and/or Servicing as a PFI. Such suspension shall not limit the MPF Bank's prerogative to take other steps to enforce its rights or to protect its interests. The MPF Bank, at its sole discretion, may require the PFI to repurchase a deficient Mortgage Loan. In addition to other available remedies, the MPF Bank may demand repurchase when the PFI: • Does not submit Mortgage Loan documents support within the time provided; • Has not complied with any requirement, term or condition of the Applicable PFI Agreement; • Has submitted a Mortgage Loan deemed to be other than of investment quality; • Has breached warranties or representations contained in the Applicable Agreements; • Has been unable to furnish satisfactory evidence of compliance with the Applicable Agreements; or • Has inappropriately underwritten and/or documented a Mortgage Loan at the time of origination. The PFI may appeal the MPF Bank’s repurchase directive if the PFI has additional supporting information and/or documentation that may affect the MPF Bank’s decision. 64 MPF Announcement 2017-13 (3/28/17) . 8.2 Overview of PFI’s or Servicer’s Quality Control Program (5/1/19)65‌ Program‌ PFIs must maintain a QC program for Mortgage Loans originated and serviced under the MPF Program. Each QC program must be designed to fit the specific needs of the individual organization’s operating environment. The QC program must ensure that Mortgage Loans delivered to the MPF Program: • Conform to the MPF Program RequirementsProgram's requirements; • Are of a quality acceptable to the MPF Bank and other institutional investors; and • Comply with the insurer and/or guarantor requirements. The PFI’s QC program must comply with the following requirements: • Be documented in writing; • Provide standard QC procedures for all personnel involved with or impacted by the QC process; • Include the performance of pre-Closing and post-Closing QC reviews; • Provide for the independence of the post-Closing QC process from the mortgage origination, processing and underwriting departments; • Include a process for identifying a representative sample of loans for QC review using both random and targeted selection processes that include loans from the following: o Originated through each applicable production channel (retail, correspondent, and/or third party originations); o Originated under all product lines; and o Originated using all underwriting methods (manual and AUS). • Have the capacity to monitor and evaluate the overall quality of mortgage production on a regular and timely basis including the reverification of Appraisals and appraiser review procedures or of the property value used to obtain an Appraisal Waiver offer; • Include procedures for the review of Early Payment Default (EPD) loans; • Comply with the specific requirements relating to sample size and selection, reverification, file review, Appraisal and appraiser review, and reporting; • Outline requirements for validating that Mortgage Loans are originated in accordance with established policies and procedures; • Include a process for reviewing QC work performed by vendors; • Include a process for maintaining records for three (3) years of QC findings and reports, loan files reviewed, and all related documentation. The location of the records must be documented; • Include an audit process to ensure the QC processes and procedures are followed by QC staff and that its assessments and conclusions are recorded and consistently applied; • Ensure the Mortgage Loans comply with the Guides, which includes compliance with Applicable Laws and Applicable Agreements, and are in all respects eligible for delivery under the MPF ProgramLaws; and • Guard against fraud, negligence, errors, and omissions by officers, employees, contractors (whether or not involved in the origination of the Mortgage Loans) brokers, Borrowers, marketing partners, and others involved in the mortgage process; and • Have written procedures for reporting the results of the QC reviews that include the following: o Method of monthly reporting of review findings; o Identification of critical components to be included in the reports; o Distribution of loan-level findings to senior management; o Distribution of loan-level findings to the business unit(s), specifically to parties responsible for resolution; o Requirement for a timely response to and resolution of (or a plan for resolution of) findings identified in the QC review process; and o Maintenance of accurate and detailed records of the results of the QC reviews. The structure of the QC program should must take into account: • The size and structure of the organization; • The qualifications of the staff; • The geographic areas of operations; • The branch structure; • The volume and types of mortgages originated; • The origination sources used; and • Any significant changes in the product lines, origination sources or production processes. Quality Standards and Measures (3/28/17)66‌ The PFI is responsible for developing and maintaining standards of mortgage quality and for establishing and designing a process to achieve those standards. The PFI’s QC Plan must include a general overview of their QC philosophy, plan objectives, and identification of the specific risks the PFI intends to measure, monitor, and manage. The QC Plan must establish a methodology for identifying, categorizing, and measuring defects and trends against an established target defect rate. At a minimum, the PFI must identify any Mortgage Loans with a defect (defined as a Mortgage Loan not in compliance with the Guides, Applicable Agreements, or Applicable Standards) and establish a methodology by which all Mortgage Loans with identified defects can be categorized based on the severity of the defect. The QC reports must define the severity levels that are appropriate for the organization and reporting needs. However, the highest level of severity must be assigned to those Mortgage Loans with defects resulting in the Mortgage Loan not being eligible as delivered under the MPF Program. The QC Plan must also establish a post-Closing target defect rate for its organization, reflecting its quality standards and goals. The establishment of a target defect rate is based on the post-Closing random QC sample. Different target defect rates may be established for different severity levels. However, at a minimum, a target defect rate must be established for the highest level of severity. Target defect rates are not required, although recommended, to be set for lower severity level post-Closing QC reviews, pre- Closing QC reviews, or targeted QC reviews. 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 rate(s) must be evaluated and, if necessary, reset at least annually. The PFI must document the rationale for establishing the target rate(s). The MPF Bank or the MPF Provider may assess how the chosen target defect rate affects risk and may provide input on a more appropriate target.

Violation of Applicable Laws. ‌ A violation of any Applicable Laws by the PFI or Servicer will be considered an Event of Default. 60 63 MPF Announcement 2016-30 (12/22/16) 61 FICO® is a registered trademark of the Fair Xxxxx Corporation. 62 MPF Announcement 2017-13 (3/28/17) CHAPTER 8. QUALITY CONTROL PROGRAM‌ PROGRAM‌ 8.1 MPF Bank’s Quality Control Review (3/28/17)64‌ 10/22/21)64‌ The MPF Bank reserves the right to conduct a quality control (QC) review of any Mortgage Loan delivered under the MPF Program. The MPF Provider will review each Mortgage Loan selected for post-funding QC review to verify that it meets the definition of investment quality and complies with the Guides and the Applicable Agreements. The MPF Provider or its designee will send a an email request to the PFI in writing to submit specified Mortgage Loan Files to the MPF Provider or its designee. The PFI must send comply by providing the requested information according to the address contained instructions provided for in the letterrequest. The files must be delivered within fifteen (15) days of the date of the letter. Failure to promptly forward comply with a request to provide a file selected for QC review may result in suspension of the PFI's origination or Servicing activities under the MPF Program. An offer by the PFI to purchase or repurchase the Mortgage Loan from the MPF Bank will not release the PFI from the requirement to submit the file for the QC review. After the QC review PFIs submission is completereviewed, the PFI will be notified in writing of those Mortgage Loans with defects. No defects and a notice will be given relating to nondeficient Mortgage Loans. The PFI must remediate Defect exceptions are cited in the defects within thirty (30) days from the date following levels of the notification issued by the MPF Bank. Failure of the PFI to take corrective action within the required time may result in suspension of origination and/or Servicing as a PFI. Such suspension shall not limit the MPF Bank's prerogative to take other steps to enforce its rights or to protect its interests. The MPF Bank, at its sole discretion, may require the PFI to repurchase a deficient Mortgage Loan. In addition to other available remedies, the MPF Bank may demand repurchase when the PFIseverity: • Does not submit Mortgage Loan documents support within Critical*: An exception that affects the time provided; • Has not complied with any requirement, term or condition of the Applicable Agreement; • Has submitted a Mortgage Loan deemed to be other than of investment quality; • Has breached warranties or representations contained in the Applicable Agreements; • Has been unable to furnish satisfactory evidence of compliance with the Applicable Agreements; or • Has inappropriately underwritten and/or documented a Mortgage Loan at the time of origination. The PFI may appeal the MPF Bank’s repurchase directive if the PFI has additional supporting information and/or documentation that may affect the MPF Bank’s decision. 64 MPF Announcement 2017-13 (3/28/17) 8.2 Overview of PFI’s or Servicer’s Quality Control Program (5/1/19)65‌ PFIs must maintain a QC program for Mortgage Loans originated and serviced under the MPF Program. Each QC program must be designed to fit the specific needs of the individual organization’s operating environment. The QC program must ensure that Mortgage Loans delivered to the MPF Program: • Conform to the MPF Program Requirements; • Are of a quality acceptable to the MPF Bank and other institutional investors; and • Comply with the insurer and/or guarantor requirements. The PFI’s QC program must comply with the following requirements: • Be documented in writing; • Provide standard QC procedures for all personnel involved with or impacted by the QC process; • Include the performance of pre-Closing and post-Closing QC reviews; • Provide for the independence of the post-Closing QC process from the mortgage origination, processing and underwriting departments; • Include a process for identifying a representative sample of loans for QC review using both random and targeted selection processes that include loans from the following: o Originated through each applicable production channel (retail, correspondent, and/or third party originations); o Originated under all product lines; and o Originated using all underwriting methods (manual and AUS). • Have the capacity to monitor and evaluate the overall quality of mortgage production on a regular and timely basis including the reverification of Appraisals and appraiser review procedures or of the property value used to obtain an Appraisal Waiver offer; • Include procedures for the review of Early Payment Default (EPD) loans; • Comply with the specific requirements relating to sample size and selection, reverification, file review, Appraisal and appraiser review, and reporting; • Outline requirements for validating that Mortgage Loans are originated in accordance with established policies and procedures; • Include a process for reviewing QC work performed by vendors; • Include a process for maintaining records for three (3) years of QC findings and reports, loan files reviewed, and all related documentation. The location of the records must be documented; • Include an audit process to ensure the QC processes and procedures are followed by QC staff and that its assessments and conclusions are recorded and consistently applied; • Ensure the Mortgage Loans comply with the Guides, which includes compliance with Applicable Laws and Applicable Agreements, and are in all respects eligible for delivery under the MPF Program; and • Guard against fraud, negligence, errors, and omissions by officers, employees, contractors (whether or not involved in the origination eligibility of the Mortgage Loans) brokersLoan per established MPF guidelines, Borrowers, marketing partners, and others involved in the mortgage process; and • Have written procedures for reporting the results of the QC reviews that include the following: o Method of monthly reporting of review findings; o Identification of critical components to be included in the reports; o Distribution of loan-level findings to senior management; o Distribution of loan-level findings to the business unit(s), specifically to parties responsible for resolution; o Requirement for a timely response to and resolution of (or a plan for resolution of) findings identified in the QC review process; and o Maintenance of accurate and detailed records of the results of the QC reviews. The structure of the QC program should take into account: • The size and structure of the organization; • The qualifications of the staff; • The geographic areas of operations; • The branch structure; • The volume and types of mortgages originated; • The origination sources used; and • Any significant changes in the product lines, origination sources or production processes. Quality Standards and Measures (3/28/17)66‌ The PFI is responsible for developing and maintaining standards of mortgage quality and for establishing and designing a process to achieve those standards. The PFI’s QC Plan must include a general overview of their QC philosophy, plan objectives, and identification of the specific risks the PFI intends to measure, monitor, and manage. The QC Plan must establish a methodology for identifying, categorizing, and measuring defects and trends against an established target defect rate. At a minimum, the PFI must identify any Mortgage Loans with a defect (defined as a Mortgage Loan not in compliance with the Guides, Applicable Agreements, or Applicable Standards) and establish a methodology by which all Mortgage Loans with identified defects can be categorized based on the severity nature of the defectexception there is no cure. The QC reports must define Mortgage Loan will be submitted to the severity levels Investor with a recommendation for repurchase. • Serious*: An exception that are appropriate for potentially affects the organization and reporting needs. However, the highest level eligibility of severity must be assigned to those Mortgage Loans with defects resulting in the Mortgage Loan not being eligible as delivered under the per established MPF Program. The QC Plan must also establish a post-Closing target defect rate for its organizationguidelines, reflecting its quality standards and goals. The establishment of a target defect rate is however, based on the post-Closing random QC sample. Different target defect rates nature of the exception, there may be established for different severity levelsa possible cure. However, at a minimum, a target defect rate must be established for PFI’s will need to provide documentation to sufficiently cure the highest level of severity. Target defect rates are not required, although recommended, to be set for lower severity level post-Closing QC reviews, pre- Closing QC reviews, or targeted QC reviews. 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 rate(s) must be evaluated and, if necessary, reset at least annually. The PFI must document the rationale for establishing the target rate(sexception(s). The MPF Bank or the MPF Provider may assess how the chosen target defect rate affects risk and may provide input on a more appropriate target.

Violation of Applicable Laws. ‌ A violation of any Applicable Laws by the PFI or Servicer will be considered an Event of Default. 60 MPF Announcement 2016-30 (12/22/16) 61 FICO® is a registered trademark of the Fair Xxxxx Corporation. 62 MPF Announcement 2017-13 (3/28/17) 3/28/17)‌ CHAPTER 8. QUALITY CONTROL PROGRAM‌ PROGRAM‌ 8.1 MPF Bank’s Quality Control Review (3/28/17)64‌ The MPF Bank reserves the right to conduct a quality control (QC) review of any Mortgage Loan delivered under the MPF Program. The MPF Provider will review each Mortgage Loan selected for post-funding QC review to verify that it meets the definition of investment quality and complies with the Guides and the Applicable Agreements. The MPF Provider or its designee will send a request to the PFI in writing to submit specified Mortgage Loan Files to the MPF Provider or its designee. The PFI must send the requested information to the address contained in the letter. The files must be delivered within fifteen (15) days of the date of the letter. Failure to promptly forward a file selected for QC review may result in suspension of the PFI's origination or Servicing activities under the MPF Program. An offer by the PFI to purchase or repurchase the Mortgage Loan from the MPF Bank will not release the PFI from the requirement to submit the file for the QC review. After the QC review is complete, the PFI will be notified in writing of those Mortgage Loans with defects. No notice will be given relating to nondeficient Mortgage Loans. The PFI must remediate the defects within thirty (30) days from the date of the notification issued by the MPF Bank. Failure of the PFI to take corrective action within the required time may result in suspension of origination and/or Servicing as a PFI. Such suspension shall not limit the MPF Bank's prerogative to take other steps to enforce its rights or to protect its interests. The MPF Bank, at its sole discretion, may require the PFI to repurchase a deficient Mortgage Loan. In addition to other available remedies, the MPF Bank may demand repurchase when the PFI: • Does not submit Mortgage Loan documents support within the time provided; • Has not complied with any requirement, term or condition of the Applicable Agreement; • Has submitted a Mortgage Loan deemed to be other than of investment quality; • Has breached warranties or representations contained in the Applicable Agreements; • Has been unable to furnish satisfactory evidence of compliance with the Applicable Agreements; or • Has inappropriately underwritten and/or documented a Mortgage Loan at the time of origination. The PFI may appeal the MPF Bank’s repurchase directive if the PFI has additional supporting information and/or documentation that may affect the MPF Bank’s decision. 64 MPF Announcement 2017-13 (3/28/17) 8.2 Overview of PFI’s or Servicer’s Quality Control Program (5/1/19)65‌ PFIs must maintain a QC program for Mortgage Loans originated and serviced under the MPF Program. Each QC program must be designed to fit the specific needs of the individual organization’s operating environment. The QC program must ensure that Mortgage Loans delivered to the MPF Program: • Conform to the MPF Program Requirements; • Are of a quality acceptable to the MPF Bank and other institutional investors; and • Comply with the insurer and/or guarantor requirements. The PFI’s QC program must comply with the following requirements: • Be documented in writing; • Provide standard QC procedures for all personnel involved with or impacted by the QC process; • Include the performance of pre-Closing and post-Closing QC reviews; • Provide for the independence of the post-Closing QC process from the mortgage origination, processing and underwriting departments; • Include a process for identifying a representative sample of loans for QC review using both random and targeted selection processes that include loans from the following: o Originated through each applicable production channel (retail, correspondent, and/or third party originations); o Originated under all product lines; and o Originated using all underwriting methods (manual and AUS). • Have the capacity to monitor and evaluate the overall quality of mortgage production on a regular and timely basis including the reverification of Appraisals and appraiser review procedures or of the property value used to obtain an Appraisal Waiver offer; • Include procedures for the review of Early Payment Default (EPD) loans; • Comply with the specific requirements relating to sample size and selection, reverification, file review, Appraisal and appraiser review, and reporting; • Outline requirements for validating that Mortgage Loans are originated in accordance with established policies and procedures; • Include a process for reviewing QC work performed by vendors; • Include a process for maintaining records for three (3) years of QC findings and reports, loan files reviewed, and all related documentation. The location of the records must be documented; • Include an audit process to ensure the QC processes and procedures are followed by QC staff and that its assessments and conclusions are recorded and consistently applied; • Ensure the Mortgage Loans comply with the Guides, which includes compliance with Applicable Laws and Applicable Agreements, and are in all respects eligible for delivery under the MPF Program; and • Guard against fraud, negligence, errors, and omissions by officers, employees, contractors (whether or not involved in the origination of the Mortgage Loans) brokers, Borrowers, marketing partners, and others involved in the mortgage process; and • Have written procedures for reporting the results of the QC reviews that include the following: o Method of monthly reporting of review findings; o Identification of critical components to be included in the reports; o Distribution of loan-level findings to senior management; o Distribution of loan-level findings to the business unit(s), specifically to parties responsible for resolution; o Requirement for a timely response to and resolution of (or a plan for resolution of) findings identified in the QC review process; and o Maintenance of accurate and detailed records of the results of the QC reviews. The structure of the QC program should take into account: • The size and structure of the organization; • The qualifications of the staff; • The geographic areas of operations; • The branch structure; • The volume and types of mortgages originated; • The origination sources used; and • Any significant changes in the product lines, origination sources or production processes. Quality Standards and Measures (3/28/17)66‌ The PFI is responsible for developing and maintaining standards of mortgage quality and for establishing and designing a process to achieve those standards. The PFI’s QC Plan must include a general overview of their QC philosophy, plan objectives, and identification of the specific risks the PFI intends to measure, monitor, and manage. The QC Plan must establish a methodology for identifying, categorizing, and measuring defects and trends against an established target defect rate. At a minimum, the PFI must identify any Mortgage Loans with a defect (defined as a Mortgage Loan not in compliance with the Guides, Applicable Agreements, or Applicable Standards) and establish a methodology by which all Mortgage Loans with identified defects can be categorized based on the severity of the defect. The QC reports must define the severity levels that are appropriate for the organization and reporting needs. However, the highest level of severity must be assigned to those Mortgage Loans with defects resulting in the Mortgage Loan not being eligible as delivered under the MPF Program. The QC Plan must also establish a post-Closing target defect rate for its organization, reflecting its quality standards and goals. The establishment of a target defect rate is based on the post-Closing random QC sample. Different target defect rates may be established for different severity levels. However, at a minimum, a target defect rate must be established for the highest level of severity. Target defect rates are not required, although recommended, to be set for lower severity level post-Closing QC reviews, pre- Closing QC reviews, or targeted QC reviews. 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 rate(s) must be evaluated and, if necessary, reset at least annually. The PFI must document the rationale for establishing the target rate(s). The MPF Bank or the MPF Provider may assess how the chosen target defect rate affects risk and may provide input on a more appropriate target.