WASHINGTON—Government-sponsored enterprise (GSE) Fannie Mae is starting a pilot program to offer an enterprise-paid mortgage insurance (EPMI) option – an alternative to the borrower-paid and lender-paid options currently available.
The EPMI option is part of the GSE's larger single-family credit risk transfer (CRT) strategy as it will transfer more risk to private mortgage insurance companies.
The pilot program, which is similar to the integrated mortgage insurance (IMAGIN) pilot Freddie Mac launched in March, will allow Fannie Mae to exert more control over and streamline the mortgage insurance process. Under EPMI, lenders are not required to purchase mortgage insurance for loans with loan-to-value (LTV) ratios above 80%, which would simplify the process of selling loans to the GSEs. Fannie Mae is responsible for acquiring the insurance, filing claims and performing monthly reporting through the EPMI option, noted NAFCU in its analysis.
Potentially Lower Payments
EPMI could offer lower initial monthly payments for borrowers than the borrower-paid or lender-paid options. However, unlike borrower-paid, borrowers using the EPMI option cannot cancel their mortgage insurance when the LTV reaches 80% of the property value, NAFCU said.
More details about the EPMI pilot program are available here. NAFCU, which said it has been generally supportive of the GSEs' CRT initiatives, added that it will review the details and monitor the program for any possible impacts on credit unions.