| The nation’s mortgage insurers are raising red flags about a new enterprise-paid mortgage insurance product at the Federal National Mortgage Association.
On Tuesday, Fannie Mae issued a notice about the enterprise-paid option, which it says satisfies its charter requirement for mortgages with high loan-to-value ratios. The secondary mortgage lender said the additional option is being offered as an alternative to borrower-paid and lender-paid mortgage insurance. The program is initially being offered on a limited pilot basis to a diverse, representative cross-section of large, medium and small lenders. The Washington-based company said that pilot lenders span a mix of geographies and business models — including independent mortgage bankers and a variety of financial institutions. “Enterprise-paid mortgage insurance is a new alternative to the traditional mortgage insurance acquired by lenders,” the notice stated. “EPMI enables lenders to deliver a loan with an LTV greater than 80 percent to Fannie Mae without the lender-acquired mortgage insurance, in return for an additional loan-level price adjustment fee paid by the lender to Fannie Mae.” Fannie said the program offers a more streamlined process for lenders and provides improved execution for lenders and borrowers. But American mortgage insurers aren’t so keen on the program. A written statement from Lindsey Johnson, the president and executive director of U.S. Mortgage Insurers, called the program “a troubling development.” The trade group says the program heightens concerns about the government-sponsored enterprises’ expanding roles in the housing finance system. “Even after Congress raised questions about the Federal Housing Finance Agency and GSEs’ lack of transparency in developing, approving and rolling out new products and activities — and their expanding operations in the mortgage market — Fannie Mae has moved ahead with a new program that bypasses the high capital and operational standards developed and enforced by the GSEs for private mortgage insurers, despite the fact that these entities are taking the exact same risk,” Johnson said. “Like Freddie Mac’s Integrated Mortgage Insurance (IMAGIN) program, this new Fannie Mae program represents a significant blurring of the bright line separation between primary market and secondary market activities and greater vertical integration of private sector activities into the GSEs.” Johnson additionally warned that the program gives an unfair advantage for EPMI compared to other sources of private capital. Fannie noted that lender deliveries are currently limited to just whole-loan commitments. Mortgage-backed securities will become an option in the future. |
