The new master insurance policies will be more transparent for both originators and servicers as coverage terms will be clarified and claims processing will become more timely and consistent.
The creation of these new master policies started in 2013, when the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mae called for the two companies to develop aligned requirements. All approved private mortgage insurers must have these in place as of July 1.
The new requirements are designed to achieve clarity of coverage and greater efficiency in the private mortgage insurance business.
Key changes in the master policy include the implementation of various loss-mitigation strategies developed during the housing crisis to help troubled homeowners. The revised master policy establishes specific timeframes for processing claims, including requests for additional documentation.
The revisions also include standards for determining when, and under what circumstances, coverage under the mortgage insurance policy must be maintained for individual loans and when it may be rescinded or cancelled. The revised master policy requirements are designed to increase communication and information sharing between insurers, servicers and Fannie Mae and Freddie Mac and to clarify rights and responsibilities.
Mortgage Insurers have already begun filing these new master policies with state insurance regulators. Though in general the MIs’ master policies are more aligned, they are not entirely identical. For example, National MI recently introduced enhancements to its master policy with new terms that provide rescission relief after 12 months on every loan National MI insures for both delegated and non-delegated channels, since National MI will underwrite every loan we insure in both channels. The feedback from lenders we’ve discussed our new policy with has been positive; in particular they like the unique National MI concept of rescission relief after 12 timely monthly payments from the borrower.
All in all, we consider the new GSE requirements a step forward as they will lend clarity to and update gaps in the existing master policy structure. And that’s positive news for both lenders and MIs alike.
Glen Corso is executive vice president and general counsel for National MI, a private mortgage insurer based in Emeryville, CA. Glen is an expert in private mortgage insurance legal and regulatory matters, and public policy. He has over 35 years of experience in mortgage regulatory and legislative affairs, as well as government relations for private mortgage insurance companies. National Mortgage Insurance Corp. is a subsidiary of NMI Holdings, Inc.