Blog Archives

Fannie and Freddie Overhaul Mortgage Insurance Master Policy Requirements

Fannie Mae and Freddie Mac have completed a major overhaul of their master policy requirements for private mortgage insurance the Federal Housing Finance Agency (FHFA) announced today.  The changes meet one of FHFA’s 2013 Conservatorship Scorecard goals for the two government sponsored enterprises (GSEs), aligning their individual policy requirements.  The changes are the first made to the master policies in many years FHFA said


Private mortgage insurance is required of borrowers who provide less than a 20 percent downpayment on a home purchase.   While the premiums are paid by the borrower, the insurance covers losses for the lender or the loan’s owner should the homeowner default on payments.  Mortgage insurance master policies specify the terms of business interaction between seller-servicers and mortgage insurers.  FHFA said the GSEs have worked with the mortgage insurance industry to identify and fix gaps in the existing master policies and the new policies will, among other things, facilitate timely and consistent claims processing.


The changes include a requirement that the master policies support various loss mitigation strategies that were developed during the housing crisis to help troubled homeowners and establishes specific timelines for processing claims, including requests of additional documentation.  The changes also seek to address a frequent source of complaints from homeowners, setting standards for determining when and under what circumstances the mortgage insurance must be maintained or can be terminated.  The changes are also designed to promote better communication among insurers, servicers, and the GSEs.


“Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac,” said FHFA Acting Director Ed DeMarco. “The new standards update and clarify the responsibilities of insurers, originators and servicers and they enhance the insurance protection provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers.”


The changes will be incorporated by mortgage insurance companies into new master policies which will be filed with state insurance regulations for review and approval.  FHFA said it expects the master policies will go into effect in 2014.


Andrew Bon Salle, Fannie Mae’s Executive Vice President, Single-Family Underwriting, Pricing, and Capital Markets said of the changes, “Mortgage insurers are an important part of the mortgage finance system and these changes help lay the foundation for a stronger system going forward. These updates will help us better manage our credit risk, which we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners and taxpayers.”


Wells Fargo Rumored to Have Wrapped up Bond Claims


According to sources speaking to Bloomberg, an agreement has been reached between Wells Fargo Bank and the Federal Housing Finance Agency (FHFA) to resolve claims that the bank sold faulty mortgage bonds to Fannie Mae and Freddie Mac.  The amount of the settlement has not been disclosed but is reported to be less than $1 billionBloomberg said the settlement was subject to a confidentiality agreement and thus the source of their story asked not to be named.


Dow Jones Business News said that FHFA had filed 18 lawsuits in 2011 against a number of large financial institutions over $200 billion in mortgage securities sold to the GSEs but never filed suit against Wells Fargo.  The parties instead reached an agreement which extended the statute of limitations beyond September 2011 in the event the parties could not reach a settlement.


The FHFA settlement is apparent independent of one Wells Fargo reached with Freddie Mac in October for $780 million.  Last spring the bank stated in an SEC filing that it had settled Fannie Mae’s claims over mortgage bonds and stated that the unspecified amount was covered by its reserves.  Dow Jones said the bank will likely disclose the terms if not the amount of this settlement in the same manner.


Spokespersons for both Wells Fargo and FHFA refused comment on the story.

Home Prices Rise for 19th Straight Month; Pace Decelerating

Home prices posted a 19th consecutive monthly gain in August the Federal Housing Finance Agency (FHFA) said on Wednesday.  FHFA’s purchase only Home Price Index (HPI) rose 0.3 percent on a seasonally adjusted basis from July but the 1.0 percent increase previously reported for July was revised down to 0.8 percent.

On a year-over-year basis the August index was up 8.5 percent.  Prices have now returned to the April 2005 index level but remain 9.4 percent below the home price peak attained in April 2007.

The index increased in seven of the nine U.S. Census Divisions in August with the South Atlantic and East North Central divisions experiencing declines.  The South Atlantic region, which encompasses all coastal states from Delaware to Florida plus West Virginia, was down 0.5 percent and the East North Central (Michigan, Wisconsin, Illinois, Indiana, and Ohio) division saw prices go down 0.3 percent.

The largest month-over-month increases were in the Mountain (Utah, Montana, Colorado, Nevada, Arizona, New Mexico, Idaho) and West North Central (Minnesota, both Dakotas, Nebraska, Iowa, Kansas, Missouri) divisions which rose 1.3 percent and 1.2 percent respectively.

The August 2012 to August 2013 changes were largest in the Pacific Region (California, Oregon, Washington, Hawaii, and Alaska) where prices appreciated 18.2 percent and the Mountain division with a 13.8 gain.  The smallest annual increase was in the Middle Atlantic division which consists of New York, New Jersey, and Pennsylvania and where prices were up 4.0 percent.

The FHFA index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises Fannie Mae and Freddie May.


Article by Jann Swanson

For more information please visit