Fannie Is At It Again!
A friend of mine (her name is Diana) recently sent me an article on Fannie Mae and private mortgage insurance. The government can’t get out of their own way! She did a very nice job of giving her take on the article. Her comments appear in quotes.
“Mortgage Insurance (MI) companies must approve the short sale as the lender makes their claim immediately upon receipt of the offer to purchase. In the past, the lenders have worked out independent agreements with MI companies to allow the sale to go forward. Now, the effect is the limiting or preventing some of these solutions leaving the MI company with no alternative but to demand contributions by way of cash or prom note thereby killing many short sales.”
This new policy will kill most realtor assisted short sales (that involve MI) due to the buyers, sellers and realtors inability to contribute money to settle prom notes and or deficiency judgments (It’s not that they can’t contribute (as long as it is disclosed) it’s that they WON’T contribute. Wouldn’t it be great if you could work with a buyer that could solve these issues?
Fannie: Servicer side agreements with mortgage insurers prohibited
By: KERRY CURRY
Fannie Mae told mortgage servicers Friday that any deals that would compromise mortgage insurance on loans delivered to the government-sponsored enterprise are strictly prohibited.
Fannie issued a servicer policy update clarifying its prohibitions on loss sharing, indemnification and settlement agreements with mortgage insurers.
“Fannie Mae reminds servicers of their contractual obligation and responsibility to ensure that any mortgage insurance coverage required at the time a loan is delivered to Fannie Mae is maintained and remains in force to protect Fannie Mae’s interests in its mortgage loans at all times, unless the conditions that Fannie Mae imposes for replacing or canceling the coverage are met,” the guidance stated.
Fannie Mae clarified that arrangements that compromise mortgage insurance coverage are generally inconsistent with protecting the GSE’s interests in mortgage loans.
“Effective immediately, Fannie Mae is prohibiting servicers from entering into any agreement that modifies the terms of an approved mortgage insurance master policy on loans delivered to Fannie Mae.”
Prohibited agreements include, but are not limited to, agreements that directly or indirectly:
Modify master policy provisions for settling of claims
Limit the right of a mortgage insurer to conduct file reviews or investigate claims
Limit the right of a mortgage insurer to rescind coverage
Rescind or modify coverage,
Restrict notice to Fannie Mae of changes in coverage status.
Fannie said servicers must also disclose any such agreements previously enacted with mortgage insurers.