Fannie Mae and Freddie Mac have
completed a major overhaul of their master policy requirements for private
mortgage insurance the Federal Housing Finance Agency (FHFA) announced
today. The changes meet one of FHFA's 2013
Conservatorship Scorecard goals for the two government sponsored enterprises
(GSEs), aligning their individual policy requirements. The changes are the first made to the master
policies in many years FHFA said
Private mortgage insurance is required
of borrowers who provide less than a 20 percent downpayment on a home purchase.
While the premiums are paid by the
borrower, the insurance covers losses for the lender or the loan's owner should
the homeowner default on payments. Mortgage
insurance master policies specify the terms of business interaction between
seller-servicers and mortgage insurers. FHFA
said the GSEs have worked with the mortgage insurance industry to identify and
fix gaps in the existing master policies and the new policies will, among other
things, facilitate timely and consistent claims processing.
changes include a requirement that the master policies support various loss
mitigation strategies that were developed during the housing crisis to help troubled
homeowners and establishes specific timelines for processing claims, including
requests of additional documentation.
The changes also seek to address a frequent source of complaints from
homeowners, setting standards for determining when and under what circumstances
the mortgage insurance must be maintained or can be terminated. The changes are also designed to promote
better communication among insurers, servicers, and the GSEs.
the mortgage insurance master policy requirements is a significant
accomplishment for Fannie Mae and Freddie Mac," said FHFA Acting Director Ed
DeMarco. "The new standards update and clarify the responsibilities of
insurers, originators and servicers and they enhance the insurance protection
provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers."
changes will be incorporated by mortgage insurance companies into new master
policies which will be filed with state insurance regulations for review and
approval. FHFA said it expects the
master policies will go into effect in 2014.
Salle, Fannie Mae's Executive Vice President, Single-Family Underwriting,
Pricing, and Capital Markets said of the changes, "Mortgage insurers are an important part of the mortgage
finance system and these changes help lay the foundation for a stronger system
going forward. These updates will help us better manage our credit risk, which
we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners