Fannie Mae recently announced the launch of a pilot program to create an enterprise-paid mortgage insurance (EPMI) option.
Through this program, lenders are not required to purchase mortgage insurance for loans with loan-to-value (LTV) ratios above 80 percent. Through the EPMI option, Fannie Mae would be responsible for acquiring the insurance, filing claims and performing monthly reporting. This would simplify the process of selling loans to government-sponsored entities.
Additionally, EPMI could offer lower initial monthly payments for borrowers than the current borrower-paid or lender-paid options. However, unlike borrower-paid mortgage insurance, borrowers using the EPMI option cannot cancel their mortgage insurance when the LTV reaches 80 percent of the property value.
This EPMI option would be an alternative to the current borrower-paid and lender-paid options. It would transfer more risk to private mortgage insurance companies
The pilot program is similar to the integrated mortgage insurance (IMAGIN) pilot Freddie Mac launched in March. It will allow Fannie Mae to streamline and exert more control over the mortgage insurance process.
The National Association of Federally-Insured Credit Unions (NAFCU) supports this initiative, which is aligned with the association’s core principles for housing finance reform. NAFCU officials will review the details and monitor the program for any possible impacts on credit unions.