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The M.I. Bulletin

Mortgage insurance policies, guidelines updated for changing market

Dec. 6, 2010

By JERRY DeMUTH MortgageDaily.com


Major mortgage insurers have recently updated policies and revised guidelines for rate quotes, minimum FICO scores and market classifications. Also impacted are ratings, validation requirements and refinances under a federal program. Many of the changes are less restrictive, while some involve enhanced offerings.

Because letters offering employment do not confirm the acceptance of a job, United Guaranty now says such letters need to provide the same employment and income information as found on standard employment forms, a start date that is prior to the loan closing date, and an employment letter or contract that has been verified.

United Guaranty also is updating its declining markets classifications to allow more accurate loan pricing, creating four geographic quality indices -- GQX A, GQX B, GQX 3 and GQX 4 -- that replace stable, moderately declining, standard declining and severely declining, respectively. As a result, pricing will be improved in the first two categories for borrowers with higher credit scores and higher debt-to-income ratios.

In addition, under such enhancements to its performance premium ratings as adding loan variables related to the number of borrowers on the loan, United Guaranty will lower the pricing on loans using borrower-paid, single-premium M.I. And under United Guaranty's new Secure Quote program, performance premium rate quotes will be honored for 60 days and can be saved using Rate Runner, United Guaranty's online rate quote system.

United Guaranty has also made some enhancements to Rate Runner, adding three new fields: the number of borrowers that will actually occupy the property, the number of borrowers on the loan whose income is being used to qualify the loan, and the credit score for each borrower on the loan.

Radian Guaranty Inc. also has implemented changes to its rates and guidelines that now are applicable to all M.I. applications. Mortgages with loan-to-values of 95.01 percent to 97 percent and FICO scores of at least 720 will now be eligible for mortgage insurance provided that the borrower provides 3 percent toward the down payment and the borrower's DTI ratio is no higher than 41 percent.

Radian is also now offering a non-agency jumbo loan program with a maximum loan amount of $250,000 over the maximum eligible agency loan limit for the subject property location. But the minimum FICO score is 760 and the maximum DTI is 45 percent. And it is expanding its standard program eligibility to include high balance loans in FHFA designated high cost areas up to a maximum loan amount of $729,750.

Other changes at Radian include temporary buydowns and 1 percent ARMs now priced as non-fixed for BPMI prime loans and property value will be considered as determined by an eligible field review when provided in accordance with Fannie Mae guidance. Also, pricing for loans on properties in New York State will be moving to Radian's current published rates. However, pricing for loans with LTVs of 95.01 percent to 97 percent and FICOs of 720 and higher are still subject to regulatory approval.

Genworth Financial's new underwriting guidelines for mortgage insurance include a DTI ratio of no more than 41 percent, an LTV maximum of 95 percent and a FICO credit score of at least 740 for primary residences. For second homes and GSE conforming loans, borrowers must contribute at least 5 percent from their own funds and only single-family, detached homes are eligible. Cash-out refinance loans also require DTI ratios of no more than 41 percent and only single-family detached homes are eligible.

MGIC has changed its refinance policy. Rate-and-term refinances not previously insured by MGIC in Tier One and Tier Two markets are now allowed. Also now allowed are payoffs of purchase-money seconds in all markets if the junior lien was originated as a purchase-money second with the first and second lien recorded simultaneously or if the only draw of a Home Equity Line of Credit was for the acquisition of the subject property and is supported by the HUD-1 and loan history.

Fannie, to enhance the accuracy of mortgage insurance-related data, is now requiring seller-servicers to direct mortgage insurers, in writing, to provide the secondary lender with information concerning its insured loans. The purpose of this new action is to introduce requirements and provide a form that may be used for these instructions and to describe pre-delivery mortgage insurance validation efforts currently under development. A disclosure template and release instructions are posted on www.eFannieMae.com.

As a result of this new requirement, Fannie has updated its mortgage insurer contact list. The GSE has suspended from that list the California Housing Loan Insurance Fund, which had ceased writing new mortgage insurance policies in early 2010.

PMI Mortgage Insurance Co. has expanded its RTM Home Affordable Refinance Program guidelines. The maximum amount of financed closing costs is now limited to 5 percent of the existing loan's unpaid principal balance plus accrued interest, regardless of loan amount. Under the old guidelines, the limit had been 4 percent plus accrued interest or $5,000, whichever is less, on loan amounts of $417,000 or less or, on loan amounts greater than $417,000, 4 percent plus accrued interest or $10,000, whichever is less. In addition there must be no 60-day lates during the past 12 months. Eliminated are the 12-month seasoning requirement for new lender/servicer loans and income documentations and DTI requirements for loans with payment increases greater than 20 percent.

All mortgage insurance companies doing business in Florida will see the emergency assessment on most property and casualty insurance premiums increase to 1.3 percent from 1 percent on Jan. 1, 2011. This includes initial and renewal mortgage insurance premiums paid on loans secured by Florida properties, MGIC explains. MGIC says it will collect the assessments, to be identified as a separate item under the category of "premium tax/assessment information," and then remit them to the State of Florida.

Whatever the cost and requirements, private mortgage insurance, along with appropriate risk management, was cited as "key to America's housing and economic recovery," by Marti Rodamaker, president of First Citizens National Bank in Mason City, Iowa, in testimony last July before the House Financial Services Capital Markets Subcommittee on behalf of the Independent Community Bankers of America.

"The only practical means of making high loan-to-value loans, whether they're sold or held in portfolio, is with the credit enhancement provided by PMI," she said

Further, because the recession has "drained the savings accounts of many Americans," depleting this source of down payments, Rodamaker said, "PMI can be used to serve a broader segment of homebuyers than ever before. Without PMI, the housing recovery will take longer."

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Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
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