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BACKGROUNDWhen Fannie Mae and Freddie Mac (the Enterprises) purchase single-family mortgage loans where the outstanding principal balance of the mortgage exceeds 80 percent of the value of the underlying property, their charters require them to obtain an acceptable form of credit enhancement for the mortgage. Mortgage insurance is the most commonly used form of credit enhancement. Primary mortgage insurance covers the first losses on mortgage loans that exceed 80 percent loan-to-value (LTV) and reduces potential losses for Fannie Mae and Freddie Mac in the event of foreclosure.
A direct result of the financial crisis was a steep rise in defaults and foreclosures of single-family mortgages, including those owned or guaranteed by the Enterprises. Mortgage insurers (MIs) and the Enterprises suffered significant losses as a result of these defaults and foreclosures. Because many MIs did not have sufficient capital to withstand the sharp downturn, Fannie Mae and Freddie Mac suffered losses when some MIs failed to fully pay their mortgage insurance claims.
Historically, each Enterprise had its own set of eligibility requirements for MIs to obtain and maintain the status of "Approved Insurer" eligible to do business with that Enterprise. FHFA, in its role as Conservator of the Enterprises, directed Fannie Mae and Freddie Mac to revise and align their mortgage insurer eligibility requirements to ensure that approved MIs possess the financial and operational capacity to withstand a financial crisis or severe downturn going forward. This is a key Scorecard item for 2015.
On July 10, 2014 the Federal Housing Finance Agency sought public on draft eligibility requirements for private mortgage insurers that provide mortgage insurance on loans acquired by Fannie Mae or Freddie Mac. The public input period lasted 60 days, and closed on September 8. To view documents related to the draft PMIERs and input received, click here.
On April 17, 2015, Fannie Mae and Freddie Mac published revised PMIERs on their websites.
On June 30, 2015, Fannie Mae and Freddie Mac further revised the PMIERS to include financial requirements for loans with lender-paid mortgage insurance.
In the 2017 and 2018 Scorecards, FHFA directed the Enterprises to evaluate the existing PMIERS and whether changes or updates were appropriate. The Enterprises completed their analysis of the existing PMIERs and after consulting with the mortgage insurance companies, published revised PMIERs on September 27, 2018.
FHFA NEWS RELEASE:
Fannie Mae and Freddie Mac Update Their Private Mortgage Insurer Eligibility Requirements (9/27/2018)
FHFA NEWS RELEASE:
Fannie Mae and Freddie Mac Issue Revised Private Mortgage Insurer Eligibility Requirements (4/17/2015)
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