Mortgage Guaranty Insurance Corp. has made changes to its underwriting guidelines that will reduce the overlays on primary residence and second home loans that receive either a Fannie Mae Desktop Underwriter Approve/Eligible response or a Freddie Mac Loan Prospector Accept/Eligible response.
The changes bring two pages of overlays down to just three, explained Sal Miosi, vice president of marketing.
At the height of the mortgage crisis, MGIC was not considering DU or LP in its underwriting decisions. But as things returned to a more normal market, the company has once again become comfortable again with those automated underwriting systems, he said.
In January of this year it rolled out those two pages of overlays, which had different levels of comfort based on loan-to-value and credit score.
Now, it has further refined the number of overlays. Those three are a maximum LTV of 97% (and maximum combined LTV of 105%, a minimum credit score of 620, and the maximum cash out of a property is $150,000.
“With the changes that the GSEs have made to their engines, with the changes they have made to their pricing, with our own changes we have made to our credit tiered rates, we’re seeing some very, very high-quality loans right now. We found all the overlays we had were contributing a lot of complexity to the origination of that loan.
“But quite frankly, they weren’t contributing a lot of quality,” Miosi said. Those overlays were not adding a lot of value to the process. So MGIC decided to get rid of most of those.
In its 2Q13 conference call, MGIC Investment Corp. CEO Curt Culver said the company was looking to regain market share. Post-crisis, it had slipped to No. 3 in terms of new insurance written behind Radian and United Guaranty.
Miosi said the company is “taking a hard look at how we’re positioned in the channel” and its guidelines and modifying those were it can.
Those changes “at the end of the day make us a lot easier to work with,” as well as help to keep the company insuring high quality loans, he said.
Still, if the company starts to see loans come through the AU engines and the mix of business shifts, it does reserve the right to make further changes.
The goal is to make simple for the lenders to use the company, not just build market share. “We had the opportunity to be prudent (as well as) make it a lot easier on our customers,” Miosi said.
MGIC has been working hard over the past couple of years to improve the value that private mortgage insurance brings to the process and how easy it is for lenders to work with. This includes updated technology, integration with other platforms and the Gold Cert program which reduces rescission risk to lenders. This change in overlays, Miosi said, is part of that migration.