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Fannie and Freddie Overhaul Mortgage Insurance Master Policy Requirements

by devteam December 2nd, 2013 | Share

Fannie Mae and Freddie Mac haverncompleted a major overhaul of their master policy requirements for privaternmortgage insurance the Federal Housing Finance Agency (FHFA) announcedrntoday.  The changes meet one of FHFA’s 2013rnConservatorship Scorecard goals for the two government sponsored enterprisesrn(GSEs), aligning their individual policy requirements.  The changes are the first made to the masterrnpolicies in many years FHFA said</p

Private mortgage insurance is requiredrnof borrowers who provide less than a 20 percent downpayment on a home purchase.rn  While the premiums are paid by thernborrower, the insurance covers losses for the lender or the loan’s owner shouldrnthe homeowner default on payments.  Mortgagerninsurance master policies specify the terms of business interaction betweenrnseller-servicers and mortgage insurers.  FHFArnsaid the GSEs have worked with the mortgage insurance industry to identify andrnfix gaps in the existing master policies and the new policies will, among otherrnthings, facilitate timely and consistent claims processing.</p

Thernchanges include a requirement that the master policies support various lossrnmitigation strategies that were developed during the housing crisis to help troubledrnhomeowners and establishes specific timelines for processing claims, includingrnrequests of additional documentation. rnThe changes also seek to address a frequent source of complaints fromrnhomeowners, setting standards for determining when and under what circumstancesrnthe mortgage insurance must be maintained or can be terminated.  The changes are also designed to promoternbetter communication among insurers, servicers, and the GSEs.</p

“Updatingrnthe mortgage insurance master policy requirements is a significantrnaccomplishment for Fannie Mae and Freddie Mac,” said FHFA Acting Director EdrnDeMarco. “The new standards update and clarify the responsibilities ofrninsurers, originators and servicers and they enhance the insurance protectionrnprovided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers.” </p

Thernchanges will be incorporated by mortgage insurance companies into new masterrnpolicies which will be filed with state insurance regulations for review andrnapproval.  FHFA said it expects thernmaster policies will go into effect in 2014. rn</p

Andrew BonrnSalle, Fannie Mae’s Executive Vice President, Single-Family Underwriting,rnPricing, and Capital Markets said of the changes, “Mortgage insurers are an important part of the mortgagernfinance system and these changes help lay the foundation for a stronger systemrngoing forward. These updates will help us better manage our credit risk, whichrnwe believe will ultimately benefit Fannie Mae, mortgage insurers, homeownersrnand taxpayers.”

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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