A new set of requirements for mortgage insurance companies on government-sponsored enterprise loans will soon go into effect.
The Federal Housing Finance Agency in July 2014 directed Fannie Mae and Freddie Mac to revise, expand and align their risk management requirements for approved mortgage insurance companies.
The regulator accepted input on a
draft of the new private mortgage insurer eligibility requirements until September 2014.
A two-year phase-in was proposed.
On Friday, FHFA
said Fannie and Freddie are issuing revised requirements for private mortgage insurance companies that insure GSE loans.
The new requirements, which go into effect on Dec. 31,
set financial and operational standards that private mortgage insurers must meet for approval with Fannie or Freddie.
FHFA noted that the new requirements
are designed to reduce risk to the enterprises.
“The finalized requirements reflect a multi-year effort to produce a clear and comprehensive set of standards that incorporate a new, risk-based framework to ensure that approved insurers have sufficient financial and operational strength to weather an economic downturn,” the regulator stated. “Fannie Mae and Freddie Mac are issuing these requirements after the enterprises and FHFA consulted with a range of stakeholders, including state insurance commissioners, private mortgage insurers, consumer advocates and seller/servicers.”
An announcement from Radian Guaranty Inc. indicated that it was in compliance with the new requirements as of March 31.
MGIC Investment Corp.
issued a statement saying it expected its Mortgage Guaranty Insurance Co. subsidiary to be in compliance by the effective date.
The primary trade group representing mortgage insurance companies, U.S. Mortgage Insurers, weighed in on the changes.
“USMI member companies are united in support of this important effort, and are committed to fully comply with PMIERs,” a written statement said. “Finalizing the PMIERs is an important milestone for the M.I. industry. Lenders, investors and other mortgage market participants can now have even more confidence in the value and financial strength of MI.
“USMI member companies encourage FHFA to apply these standards to all providers of credit enhancement to the GSEs to ensure our housing system remains strong and stable.”
Fannie Mae
Executive Vice President-Single Family Business Andrew Bon Salle noted in a news release that the revisions marks a significant milestone in restoring confidence in the private mortgage insurance industry.
A statement from Dave Lowman, who is executive vice president of single family business at Freddie, said the requirements will promote counter-party strength for approved insurers.
