Effective January 1, 2020, Fannie Mae has introduced a new standard for lenders who use statistical sampling to select loans for QC. Highlighted details can be found in the updated Selling Guide, on page 1070:

“If the lender uses statistical sampling for its selection process, at a minimum, the statistical sampling model (variables) must be calculated using a 95% confidence level with a 2% precision rate and a statistical statement of six months (Fannie Mae recommends using a three month statement.)”

What does this mean for you? How do you calculate the correct number of loans to sample and audit under the new standard? Cogent’s statistical sample size calculator makes it easy:

To calculate a six month statement – Enter the TOTAL estimated population for the 6 months (usually by extrapolating current origination levels). Then DIVIDE the calculated Sample Size by 6 to derive a sample size for a single month.

To calculate a three month statement – Enter the TOTAL estimated population for the 3 months (usually by extrapolating current origination levels). Then DIVIDE the calculated Sample Size by 3 to derive a sample size for a single month.

Thus, a lender originating an average of 1,000 loans per month might estimate a 6-month population of 6,000 loans. Assuming an expected incidence rate (or defect rate) of 5% and a precision target of 2%, the resulting Sample Size becomes 242. Dividing this by 6 months yields a monthly sample size of 40 loans.

For more information, please see the following:

– The article “Sample Examples – The Calculator in Action” provides guidance for using the Calculator below in various scenarios.

– For an explanation of Cogent’s sampling methodology, please see the white papers on our Resources page.

Effective January 1, 2020, Fannie Mae has introduced a new standard for lenders who use statistical sampling to select loans for QC. Highlighted details can be found in the updated Selling Guide, on page 1070:

“If the lender uses statistical sampling for its selection process, at a minimum, the statistical sampling model (variables) must be calculated using a 95% confidence level with a 2% precision rate and a statistical statement of six months (Fannie Mae recommends using a three month statement.)”

What does this mean for you? How do you calculate the correct number of loans to sample and audit under the new standard? Cogent’s statistical sample size calculator makes it easy:

To calculate a six month statement – Enter the TOTAL estimated population for the 6 months (usually by extrapolating current origination levels). Then DIVIDE the calculated Sample Size by 6 to derive a sample size for a single month.

To calculate a three month statement – Enter the TOTAL estimated population for the 3 months (usually by extrapolating current origination levels). Then DIVIDE the calculated Sample Size by 3 to derive a sample size for a single month.

Thus, a lender originating an average of 1,000 loans per month might estimate a 6-month population of 6,000 loans. Assuming an expected incidence rate (or defect rate) of 5% and a precision target of 2%, the resulting Sample Size becomes 242. Dividing this by 6 months yields a monthly sample size of 40 loans.

For more information, please see the following:

– The article “Sample Examples – The Calculator in Action” provides guidance for using the Calculator below in various scenarios.

– For an explanation of Cogent’s sampling methodology, please see the white papers on our Resources page.

We’ve just posted a new webinar – “How to Automate Final Decisions in Cogent QC Systems” – that takes a deep dive into the Types of Automated Final Decisions available in Cogent – the rules that drive them, how they differ, and how to enable and implement each type.

Webinars are available at on our clients-only webpage here. If you do not have the required password, please contact info@cogentqc.com.

As always, we’re keen to hear back from you. Let us know what other topics you’d like us to cover.

We are pleased to announce that Cogent QC Systems has won the 2019 HousingWire Tech100 award, marking the fourth time that Cogent has been chosen for this select group of technology providers. More information about the HousingWire Tech100 is available here.  

Among the factors that led to the win, the judges cited Cogent QC Systems‘ new cloud solution, the versatility to audit almost any type of mortgage or consumer loan in a single system, and the ability to introduce custom functionality upon request.

A big thank you to the HousingWire judges. We are honored and inspired!

The Cogent Team

Introducing Cogent QC Essentials. A web-based quality, compliance and risk management solution that gives you access to Cogent’s award-winning QC technology directly through your browser.

Nothing to install in-house and nothing to maintain in-house means you can get up and running in short order. And it means less reliance on your IT department, which is usually busy enough on other projects.

Contact us for more details. We’d love to tell you more about it and show you a demo.