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Fannie Mae Updates Private Mortgage Insurer Requirements

pen-and-paperFannie Mae released an update to their Private Mortgage Insurer Eligibility Requirements (PMIERs) today regarding the treatment of loans with lender-paid mortgage insurance. The PMIERS are scheduled to go into effect on December 31, 2015.

Fannie Mae made updates to the PMIERS FAQs section, eligibility requirements, operational performance scorecard, quarterly portfolio and financial supplement, quarterly portfolio loan level dataset, and their selling guide.

According to the GSE, the revised PMIERs will alter the standards that a PMI vendor must meet – and maintain for the life of the business relationship – before they can provide insurance on Fannie Mae- and Freddie Mac-backed loans. The PMIERS answer questions concerning private mortgage insurance and provides insurers with guidelines to keep in mind when dealing with mortgage insurance.

“Lender-Paid Mortgage Insurance poses longer term exposure for our mortgage insurance counterparties, relative to similar mortgage insurance that is purchased by the borrower,” said Rob Schaefer, VP of credit enhancement strategy & management. “The adjustments in the PMIERs update establish minimum required asset amounts that appropriately reflect that longer horizon and ensure Fannie Mae’s mortgage insurance providers are strong counterparties for the future.”

In April, Fannie Mae published the revised PMIERS and provided notice that they were evaluating options regarding the treatment of loans with lender-paid mortgage insurance (LPMI) and would release an update by June 30, 2015.

According to Fannie Mae, “during the recent financial crisis, some mortgage insurers were unable to fully pay claims, resulting in losses to Fannie Mae and increased losses to taxpayers.”

In order to prevent these losses in the future, the GSEs moved to strengthen their financial requirements of approved PMI insurers, thus reducing overall risk. The new requirements will ensure that PMIs can meet their agreed-upon obligations regardless of current economic conditions or the marketplace.

“FHFA guided Fannie Mae and Freddie Mac in strengthening and aligning counterparty risk management policies to make certain that private mortgage insurer counterparties are able to fulfill their role of providing reliable credit enhancement for loans acquired by Fannie Mae, even in adverse market conditions,” a Fannie Mae statement reads.

Click here to view Fannie Mae's Updated Private Mortgage Insurer Eligibility Requirements.

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.

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