Mortgage insurance requirements at the two government-sponsored housing enterprises have been updated and aligned. The changes are expected to go into effect next month.
The framework for master policies for mortgage insurance companies has been aligned between Fannie Mae and Freddie Mac.
Master policies provide specific terms of business interaction between seller-servicers and mortgage insurers and are being revised to reflect the alignment.
It’s the first major overhaul of mortgage insurance master policy requirements in several years for the pair of secondary lenders.
The two companies’ regulator and conservator, the Federal Housing Finance Agency, said in a statement that the alignment was required by its 2013 Conservatorship Scorecard.
Among the improvements made is the requirement that master policies support loss mitigation strategies that were developed during the housing crisis for distressed borrowers.
Specific timeframes have been developed for claims processing and requests for additional documentation.
Standards were updated for determining when, and under what circumstances, M.I. coverage must be maintained and when it can be revoked.
The new master policies promote information sharing between mortgage insurance providers and the two secondary lenders.
“Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac,” FHFA Acting Director Ed DeMarco said in the announcement. “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.”
The aligned requirements will be filed by mortgage insurers with their state regulators for their review and approval.
The master policies are expected to become effective next year, though seller-servicers will be provided with guidance on specific effective dates during the coming weeks.
“We were happy to work with FHFA to bring about this latest step toward greater operational efficiency and transparency in the mortgage market,” Freddie Mac Executive Vice President and Chief Enterprise Risk Officer Paige Wisdom said in a statement.
“These updates will help us better manage our credit risk, which we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners and taxpayers,” Fannie Mae Executive Vice President, Single-Family Underwriting, Pricing, and Capital Markets Andrew Bon Salle said in a separate news release.
No statements about the changes were issued by major mortgage insurers or the Mortgage Insurance Companies of America.
