what is mi?...what is mi –the basics who does mortgage insurance insure? –insures the lender not...

Genworth Mortgage Insurance Corporation ©2017 Genworth Financial, Inc. All rights reserved.

What is MI?

Understanding the Basics of Mortgage Insurance‏

December 2017‏

Agenda

What we will cover‏

– Purpose of MI

– Rate Card and Genworth Rate Express®

– Products

– Paying Claims

– Cancel/Termination of MI

– Guidelines, Tools and Resources

– Questions

What is MI Understanding the Basics

All Lines Have Been Muted; Use The Questions Tab To Type In Your

Questions

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What Is MI – The Basics

?Who does Mortgage Insurance insure‏

– Insures the LENDER not the borrower

– MI required on conventional loans sold to Fannie Mae or Freddie Mac when

*LTV is greater than 80%

– FHA and VA loans are insured by HUD or the Veteran’s Administration

– Different types of MI products are available

– Investors/Lenders restrict the “type” of MI they allow

– Every MI rate is filed as required by applicable state law

– Genworth is an approved MI provider by Fannie Mae and Freddie Mac

– MI is Not life or credit life insurance

‏


*In most cases LTV is calculated by dividing the loan amount by lesser of the sales price or appraised value for a purchase or

for a refinance use the loan amount divided by the appraised value

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MI Products

Genworth Mortgage Insurance products‏

– Borrower (BPMI) and Lender Paid (LPMI)

• Monthly and Zero Monthly

– Borrower Paid and Lender Paid Standard Annual (Paid Monthly-remitted

annually)

– Borrower Paid and Lender Paid Split Premium

– Borrower Paid and Lender Paid Single Premium


Genworth Offers Many Types Of Mortgage Insurance Products; Investors

Dictate What Type Of MI They Allow

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Genworth Rates and Rate Notes

What is MI Understanding the Basics 5

6What is MI Understanding the Basics

Genworth Rate Express®



$200,000 loan, 95% LTV, 30% coverage 760 score, BPMI

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Genworth Rate Express


Monthly Premium MI (BPMI and LPMI)Monthly Premium MI‏

– Payment Option Which Features A Coverage Term Of One Month; Premiums Are Remitted Monthly.

Borrower Paid or Lender Paid‏

– Non-refundable

– When paid by lender bump up to the interest rate

Monthly or Zero Monthly‏

– What is collected at closing? Zero or two months?

Renewal Premiums‏

– For Constant Renewals:

• The Renewal Premium Rate Is Applied To The Original Loan Balance For Years 1 Through 10.

• For Years 11 Through Term, The Rate Is Reduced To 0.20% Or Remains The Same If The Rate Is

Less Than 0.20%.

• Premium Adjustments Do Not Apply To The 11th Year Rate Through Term.

• Declining Renewal Premiums are also available


Lender Benefits‏

– Premium Does Not Count Against Qualified Mortgage (QM) Points & Fees1

– Simple To Process And Explain To Borrower… Payment Embedded In PITI

– Commonly Accepted – No Investor Restrictions

– Easier Processing & Lower Monthly Payments Than FHA Loans1Per the CFPB’s ATR/QM Small Entity Compliance Guide, monthly or annual PMI premiums are excluded from Points and Fees. The language can be found on page 38 of the

guide which says the following:

“Private mortgage insurance (PMI) premiums: Exclude monthly or annual PMI premiums. You may also exclude up-front PMI premiums if the premium is refundable on a prorated

basis and a refund is automatically issued upon loan satisfaction.”

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Example of $150,000 loan amount, 90% LTV

Owner occupied, fixed rate, single family & FICO score ≥ 760


Monthly Premium MI (BPMI and LPMI)

Standard Annual (BPMI and LPMI)

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Standard Annual Premium MI‏

– A Payment Option That Features An Initial Coverage Term Of Twelve Months; Premiums

Remitted Annually. The Rate Is Higher For First Year And Reduced For Renewal Years.

Borrower Paid‏

– Refundable and Non-refundable Options

– Borrower paid can be financed (first year)

– All “annual MI premiums” excluded from fees/points from QM

Lender Paid‏

– Always non-refundable

– Interest Rate on loan is increased to include MI premium (See Secondary for Pricing)

Renewal Premiums‏

– Constant and Declining Renewals:

• Constant Renewal Premium Rate Is Applied To Original Loan Balance For Years 2 Through 10.

• For Years 11 Through Term, The Rate Is Reduced To 0.20%



Lender Benefits• Premium Does Not Count Against Qualified Mortgage (QM) Points & Fees1

• Easier Processing & Lower Monthly Payments Than FHA Loans1Per the CFPB’s ATR/QM Small Entity Compliance Guide, monthly or annual PMI premiums are excluded from Points and Fees. The language can be found on page 38 of the

guide which says the following:

“Private mortgage insurance (PMI) premiums: Exclude monthly or annual PMI premiums. You may also exclude up-front PMI premiums if the premium is refundable on a prorated

basis and a refund is automatically issued upon loan satisfaction.”

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Example of $150,000 loan amount, 90% LTV

Owner occupied, fixed rate, single family & FICO score ≥ 760 Rate of 4% and 4.5% for Lender paid scenario


Standard Annual (BPMI and LPMI)

Monthly Premium Included In Borrower Ratios Ends Up As $28.75 Per

Month ($345/12 = $28.75)

Split Premium (BPMI and LPMI)Split Premium MI‏

– Payment Option That Features Lower Monthly Rates Combined With An Upfront Premium Due At

Closing.

Borrower Paid‏

– Non-refundable : Non-refundable portion of premium included in points and fees for QM;

– Refundable Up front refundable premium up to 1.75% (current FHA premium rate) excluded from points

and fees for QM, premiums above 1.75% are included in points and fees for QM

– Borrower Paid Up front premium can be financed into the loan amount

Lender Paid‏

– Lender paid Split is always non-refundable and excluded from fees and points for QM

– Interest Rate on loan is increased to include MI premium (See Secondary for Pricing)

Renewal Premiums‏

– Constant Renewals (Only option):

• The Renewal Premium Rate Is Applied To The Original Loan Balance For Years 2 Through 10.

• For Years 11 Through Term, The Rate Is Reduced To 0.20% Or Remains The Same If The Rate Is

Less Than 0.20%.


Lender Benefits‏

– Provide Borrowers More Ways To Pay For MI (greater buying power options to structure loans)

– Qualify More Borrowers (seller contributions/concessions can be used to pay for premium)

– Easier Processing & Lower Monthly Payments Than FHA Loans


Six Split Premium Plans (Refundable/Non-

Refundable Options)


Non-Refundable Split Premium Plan #1

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Example of $150,000 loan amount, 90% LTV, Premium Option Plan 1;



Single Premiums (BPMI) or (LPMI)Borrower Paid‏

– Provides Coverage Until The Loan Amortizes To 78% Of The Original Value, Unless

Previously Cancelled

– Can be refundable or non-refundable

– Product must meet QM test for Borrower Paid: Allows for 1.75% to be excluded from

points and fees for QM if refundable pro rata. Premiums amounts above 1.75% and non-

refundable borrower paid singles must be included in QM fees and points

– Borrower paid single premiums can be financed into loan amount

Lender Paid‏– Single Premium Lender Paid Options One–time Premium Coverage For The Life Of The

Loan

– Lender paid premiums do not count against QM points and fees

– Lender Paid is always Non-refundable and cannot be financed into the loan amount

– See Secondary for Pricing

Lender Benefits‏

– Qualify More Borrowers

– Reduce Expenses – Underwrite & Process One Loan

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Reminder: For BPMI non-refundable, the borrower may still get a refund if cancelled subject to HPA.


Non-Refundable BPMI Single Premium

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Example of $150,000 loan amount



Use A Lender Credit To Pay For The Premium; Not Counted In QM Fees

And Points8. Creditor-paid charges. (Comment 32(b)(1)-2))

Charges paid by the creditor, other than loan originator compensation paid by the creditor that is required to be included in

point and fees under ~1026.32(b)(1)(ii), can be excluded from points and frees.(Page 42 in CFPB Compliance Guide, per CFPB September 13th amendment)

MI Helps How?

Borrower Benefits‏

– Less than 20% down

– Average homebuyer can take up to 10 years to save the 20% down

– MI can be cancelled-There are restrictions

• MI can be cancelled by Lenders but Investors may have certain requirements when it

can be cancelled

• Homeowners Protection Act (HPA) requires that MI must be cancelled at 78%LTV

unless Investor has parameters around defaulted situations

– Often more affordable than FHA loan

– Tax deductible in certain cases*

– Genworth supports Mortgage Loan Servicers to help borrowers stay in their

homes and mitigate losses.


*Federal laws change/expire or can be renewed retroactive; Always seek professional tax advice to verify if your MI is tax deductible

Coverage and Exposure

– Coverage‏ Percentage of Risk the MI company has

– Fannie Mae and Freddie Mac have coverage requirements

– Most investors follow Fannie/Freddie guidelines for MI coverage

– Lenders must ensure the required MI coverage is in force on the loan to deliver it

– Exposure‏ The amount of Risk the lender has

– Most investors follow “exposure” requirements of Fannie Mae and Freddie Mac

– Determining “exposure” is not part of the credit underwriting of the mortgage

– Ensuring proper MI coverage is!


Required MI Coverage

Let’s put numbers into the formula‏

– Appraisal Value/Sales Price $100,000

– Loan amount: $95,000 or 95% LTV ($95,000/$100,000 = 95%)

– Lender requires and MI provider will ensure 30% of the loan amount (which is

the standard MI coverage for Fannie Mae and Freddie Mac)

• $95,000 x 30% = $28,500

• Exposure is calculated by taking loan amount minus the covered loan amount ($95,000

- $28,500 = $66,500) and dividing by the value of $100,000

• Lender exposure will be $66,500/$100,000 or 67%


How is maximum MI Coverage Calculated?

:Unpaid Insured Loan Balance‏ $176,000

Plus‏ Allowable Foreclosure Costs: $ 18,000

:Total Outstanding Balance/Costs‏ $194,000

:Percentage of Coverage‏ 30%

:Maximum Coverage‏ ($194,000 X 30% $ 58,200)


Genworth Will Pay The Lender Lesser Of The Maximum Coverage Or

Actual Claim Amount

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Calculation of Payment Claim to Lender


:Total Outstanding Balance Costs‏ $194,000

:Less Pre-Foreclosure Sale Proceeds‏ $175,000

:Loss After Sale of Property‏ $ 19,000

:Payment due Lender in this case‏ $ 19,000*

*Genworth Would Pay The Lesser Of Maximum Claim Amount Of $58,200 ts

Or Actual Loss Of $19,000 In This Case

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CFPB Bulletin 2015-03-Clarifies Only

http://www.consumerfinance.gov/newsroom/cfpb-provides-guidance-about-private-mortgage-insurance-cancellation-and-termination/


http://www.consumerfinance.gov/newsroom/cfpb-provides-guidance-about-private-mortgage-insurance-cancellation-and-termination/

MI cannot be cancelled Without authorization from the Servicer‏

– HPA (Homeowners Protection Act) law went into effect on July 29, 1999

• Applies to single family, primary residential home loans closed on or after July 29, 1999

– Automatic Termination

• The earlier of (1) the date the mortgage balance is first scheduled to reach 78% of the

(based off original amortization schedule and original value); or (2) the month following

the mid-point of the amortization period*

– Borrower Request Cancellation Original Value

• Borrower may request to cancel MI when the loan is first scheduled to reach 80% of the

original property value or (2) the day the mortgage balance actually reaches 80% of the

original value

– Borrower Request Cancellation Current Value (NOT Covered by HPA)

• LTV ratio must be 80% or less of the current property value if seasoning is greater than

five years; or LTV ratio must be 75% or less of the current property value if the

seasoning is between 2 and 5 years.


Cancellation/Termination Guidelines*

* Additional requirements/restrictions may apply; Check with the loan servicer for requirements

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Cancellation/Termination Summary-HPA in

Black


MI Cancellation and Termination - The When and How

Cancellation/Termination

Requirements

Automatic Termination

LTV = 78%

Borrower Initiated Cancellation

LTV < 80% LTV< 75%

Yrs 2-5

LTV < 80%

After yr 5

a

b

Original Value

Appreciated Value**

a

a b

Cancellation/Termination Requirements*

**Other Restrictions May Apply

Let’s Start With Option “A” Automatic Termination

*Policies for One Unit Primary Residence Properties

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*

*

**

Automatic Termination Guidelines




Requirements


LTV = 78%


LTV < 80% LTV< 75%

Yrs 2-5

LTV < 80%

After yr 5

a

b

Original Value

Appreciated Value**

a

a b





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*

*

**

Borrower Requested Original Value


34MI Cancellation and Termination - The When and How

Borrower Initiated Cancellation “Original Value” – Cancellation Date

– Borrowers may initiate cancellation of MI by submitting a written request to the servicer

– Servicers must take action to cancel MI when “cancellation date” occurs

– Cancellation date is either: 1) The date on which the principal balance is first scheduled* to reach 80% of the “original value” (irrespective of the outstanding balance) or the date on which the principal balance reaches 80% of the “original value” based on actual payments

– MI must be cancelled on the cancellation date if the following conditions are satisfied:• Borrower must have a good payment history**

• Borrower must be current on the loan and HPA does not define “current”.

• Borrower must satisfy any requirement for certification that the equity in the property is not subject to a subordinate lien

• Borrowers must satisfy any requirement of the mortgage holder that the value of the property has not declined below the original value. Note: This requirement is used only to determine whether the property’s value has NOT declined below the original value. Cancellation date is still based off “original value”.

– Borrowers can make extra principal payments to advance the process


**HPA defines “good payment history” generally as the borrower having made no payments that were 30 days or more past due in the prior 12 months, or payments that were 60 days or more past due in the 12

month period beginning 24 months before the later of the cancellation date or the date the borrower requests cancellation.

*For fixed rate mortgages, the amortization calculation is based on the initial amortization schedule. For adjustable-rate mortgages, the amortization calculation is based on the amortization

schedule then in effect for the mortgage



Requirements


LTV = 78%


LTV < 80% LTV< 75%

Yrs 2-5

LTV < 80%

After yr 5

a

b

Original Value

Appreciated Value**

a

a b





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*

*

**


Borrower Initiated Cancellation–Current

Value

ResourcesGenworth Rate Cancellation Summary, Genworth Underwriting Guidelines,

MI Tips and Credit Policy, Mobile App


Genworth Underwriting Guidelines


Resources


Mobile App


LOS Connections



Training Tools and Information


Additional MI Site Information


ActionCenter®: 800 444.5664

Your Local Genworth

Regional Underwriter

Your Genworth Sales

Representative

Your Genworth Resources


Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for‏

accuracy, we also know that any discussion of laws and their application to particular facts is subject to

individual interpretation, change, and other uncertainties. Our training is not intended as legal advice, and is

not a substitute for advice of counsel. You should always check with your own legal advisors for

interpretations of legal and compliance principles applicable to your business.

,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED‏

INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN

NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR

CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND

THE MATERIALS.

Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training

Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your

Borrowers Better. Visit mi.genworth.com To Learn More.

Collateral Underwriter®, Home Ready ® and Desktop Underwriter® or DU® are registered trademarks of Fannie Mae

Loan Product Advisor®, Home Possible®, Home Possible Advantage®, Loan Collateral Advisor® and Home Value Explorer® (HVE®) are registered trademarks of

Freddie Mac

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what is mi?...what is mi –the basics who does mortgage insurance insure? –insures the lender not...

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