GSEs Update Mortgage Insurance Master Policy Requirements

Posted by Patrick Barnard on December 02, 2013 No Comments
Categories : Residential Mortgage

Working in conjunction with the mortgage insurance industry, government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have significantly overhauled their mortgage insurance master policy requirements, in an effort to address and update gaps in the existing master policy framework, the Federal Housing Finance Agency (FHFA) reports.

Among the improvements are new policies pertaining to the various loss mitigation strategies that were developed during the housing crisis to help troubled homeowners; the establishment of specific time frames for processing insurance claims, including requests for additional documentation; new standards for determining when, and under what circumstances, coverage under the mortgage insurance policy must be maintained and when it may be revoked; and new requirements to improve communication, so as to foster improved information sharing among mortgage insurers, servicers and the GSEs.

‘Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac,’ says Edward DeMarco, acting director of the FHFA, in a statement. ‘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.’

‘Mortgage insurers are an important part of the mortgage finance system and these changes help lay the foundation for a stronger system going forward,’ adds Andrew Bon Salle, executive vice president, single-family underwriting, pricing and capital markets for Fannie Mae, 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.’

The goal in updating the policies is to, among other things, facilitate timely and consistent claims processing, the FHFA says in its release.

Mortgage insurance master policies specify the terms of business interaction between seller-servicers and mortgage insurers.

Mortgage insurers will incorporate the aligned requirements into new master policies, which will be filed with state insurance regulators for their review and approval.

The new master policies are expected go into effect in 2014, pending review and approval by state insurance regulators.

Fannie Mae and Freddie Mac will provide guidance to lenders and servicers regarding specific effective dates in the coming weeks, according to the FHFA.

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