Freddie Changes MI Eligibility Requirements

Freddie Mac has announced a temporary change in its eligibility requirements for private mortgage insurers, citing the need to allow mortgage insurers to retain more insurance premiums to pay claims and rebuild their capital base during the current market correction. Effective on June 1, Freddie Mac-approved private mortgage insurers may not cede new risk if the gross risk or gross premium ceded to captive reinsurers is greater than 25%, the government-sponsored enterprise said. Freddie also said it is now requiring all eligible private MIs to provide additional information about their business activities to better monitor the state of the industry. The GSE also announced that it is suspending its Type II Insurer requirements that are otherwise automatically applicable to mortgage insurers that are downgraded below AA-minus or Aa3 by the rating agencies, provided that the MI commits to submitting a complete remediation plan for Freddie's review and approval within 90 days of the downgrade. Freddie can be found online at http://www.freddiemac.com.