Private Insurers Step Up as FHA Shuts Down
As the shutdown of the federal government entered its second week, private mortgage insurers alerted clients and potential clients they will insure mortgage loans if the Federal Housing Administration, operating with a skeleton crew, jeopardizes closing dates.
CUNA Mutual Group Mortgage Insurance said it is preparing a document for its website that will alert client credit unions to how the firm can assist, including relaxing requirements for verbal verification of employment in situations where a member’s agency employer might be shut down, according to CMGMI spokesman Joel Luebkeman. This policy also extends to IRS verifications as well, Luebkeman said.
“We want to be clear that we are in full accord with what Fannie Mae has said about underwriting criteria in the case of furloughed government employees,” he said, adding that CMGMI still considers the shutdown a temporary or shorter term interruption to government operations.
Other private mortgage insurers announced similar approaches with a few, such as United Gurantee, a mortgage insurance subsidiary of American International Group, announced similar policies to CMGMI and pledged in addition to turn applications around in 24 hours or less.
The search for new private mortgage insurance customers is taking place at a time when private mortgage insurance has begun to become more appealing to mainstream borrowers, not just those with jumbo loans or borrowers who are having trouble collecting a down payment, executives said.
Jon Paukovich, vice president of mortgage lending for the 215,000-member, $3.8 billion Ent Federal Credit Union, said the Colorado Springs, Colo.-based credit union has seen a that shift, and now offers private insurance it as its first and best option.
“If there is any way they can do it, we definitely believe it’s their best and cheapest option,” Paukovich said, observing that FHA had raised premiums several times in recent years.
Paukovitch attributed the drop in prices for private insurance to a better book of business for the mortgage insurance firms and an increase in competition.
“Particularly for borrowers with very good credit, private mortgage insurance can work very well,” he said.