“Ultimately, we believe Fannie Mae should abandon its consideration of a preferred providers list of lender-placed insurers that will limit services and coverage,” according to a joint letter to the Federal Housing Finance Agency.
The Consumer Mortgage Coalition, Mortgage Bankers Association and Financial Services Roundtable signed the Jan. 4 letter.
As previously reported, Fannie wants banks and servicers to use insurers that are willing to provide 30% to 40% discounts on forced-placed insurance policies on loans guaranteed by Fannie.
The three trade groups are concerned that Fannie is dictating major changes that “will drastically affect servicing operations, contracts and costs” without seeking stakeholder or public input. “As proposed, it could also harm consumers by reducing coverage,” the joint letter says.
It appears the insurance polices under Fannie’s proposal would cover the loan balance, but not necessarily the replacement value like most homeowner insurance policies.
In a separate letter, the American Bankers Association also called on the FHFA to step in and seek public comment on Fannie’s proposal.
“The proposal, if adopted, effectively would allow Fannie Mae to pick winners and losers among insurers, would be potentially inconsistent with state insurance requirements and would dramatically alter existing servicing operations, contracts, and costs, ABA said. “Such a proposed major reform of the mortgage servicing market should be considered in the sunshine.”