May 8, 2013
Performance Premium Full-File and RAP Underwriting Requirement Changes and Clarifications - Effective May 13, 2013

As part of our ongoing risk management analysis, United Guaranty is changing and/or clarifying the following Performance Premium® Full-File and RAP® underwriting requirements effective May 13, 2013.

Performance Premium Full-File

The following changes have been made to the Performance Premium Full-File Underwriting Requirements guide:

Performance Premium RAP

The following changes have been made to the Performance Premium RAP Underwriting Requirements Guide:

Section Underwriting Requirement Change or Clarification
Entire Guide
  • Removed all reference to GQX®.
2.02.01: Unacceptable DU and LP Recommendations
  • Removed DU Refer with Caution/IV from the Unacceptable DU and LP Recommendations section, because it is no longer a valid DU recommendation.
3: Ineligibility Matrix
  • Reorganized in alphabetical order.
  • Removed DU Refer with Caution/IV from the DU/LP Recommendations section, because it is no longer a valid DU recommendation.
  • Added balloon mortgages as ineligible for RAP submissions. Balloon mortgages may be submitted full file and will be considered on a loan-by-loan basis.
4.04: Additional Documentation Requirements for Agency AUS Underwritten Loans
  • Removed additional documentation requirements for loans $417,001–$625,500.
  • Clarified that if a Fannie Mae DU Refi Plus, Refi Plus, or Freddie Mac Relief Refinance Mortgage loan is submitted for new insurance as a rate/term refinance, the Agency's manual documentation underwriting requirements apply (these loans are generally submitted under United Guaranty's HARP Modification Program.)
6.01.01: Loan Amounts $417,001– $625,500
  • Removed section. United Guaranty no longer has additional requirements specific to these loan amounts (previously did not allow DU and LP documentation efficiencies). All subsequent subsections in this section were renumbered.
6.01: Jumbo Loans $625,501–$850,000
  • Clarified that only U.S. citizen and permanent resident alien borrowers are allowed.
6.02: Housing Finance Agency (HFA) Loans Using Expanded Requirements
  • Clarified United Guaranty's definition of an HFA loan as: “A first lien mortgage originated through a state, county, or municipal housing finance agency.”
  • Added the changes announced in Customer Announcement CA 2013-03.
7.03: Balloon Mortgages
  • Removed section. Balloon mortgages are no longer eligible to be submitted via RAP. Balloon mortgages may be submitted full file and will be reviewed on a loan-by-loan basis.
8.01.02:  Buy-Out Refinance
  • Removed section. United Guaranty no longer has additional requirements specific to this transaction type (previously limited to maximum 95% LTV).  All subsequent subsections in this section were renumbered.
8.01.03: Fannie Mae's DU Refi Plus, and Refi Plus, and Freddie Mac's Relief Refinance
  • Clarified that if one of these loans is submitted for new insurance as a rate/term refinance, then:
    • All rate/term refinance underwriting requirements will apply.
    • All manual underwriting documentation requirements will apply.
Note: These loans are generally submitted under United Guaranty's HARP Modification Program.
8.03.01 to 8.03.05: Construction-to-Permanent Loans
  • Clarified that for a one-time close transaction, documentation may not be more than 120 days old at the time of modification/conversion to the permanent financing.
  • Added second homes as an eligible occupancy.
  • The required minimum contribution from borrower's own funds must be documented only if the borrower has owned the lot less than 12 months (previously required on all construction-to-permanent loans, regardless of how long the lot was owned).
  • If a recertification of value or new appraisal is required, it must be no more than 120 days old on the effective date of the mortgage insurance coverage (previously no more than 60 days old).
  • For a rate/term refinance transaction, the LTV may be based on the appraised value subject to completion if the borrower has owned the lot 12 months or longer (previously the LTV was based on the lesser of the appraised value or the documented acquisition costs).
  • The purchase price of the lot may be used to determine the total acquisition cost, regardless of how long the borrower has owned the lot (previously if the lot was owned less than 12 months, the lesser of the purchase price or the appraised value of the lot was used).
  • Clarified that for a complete tear-down renovation treated as a construction-to-permanent loan, the value of the lot from the appraisal should be used to determine acquisition costs. There may also be value attributed to any site improvements that will remain (i.e., driveway, water, sewer line, etc.).
11.01.02 and 11.01.03: Borrower's Own Funds - Acceptable Sources and Unacceptable Sources
  • Disaster relief grant or loan was moved from an unacceptable source to an acceptable source.
11.03.09: Disaster Relief Grant or Loan
  • Added this section to clarify that, if the borrower receives a disaster relief grant or loan, a subordinate lien may not be recorded against the property. All subsequent subsections in this section were renumbered.
12.01.01: Valid Credit Scores
  • Updated to allow an authorized user account to satisfy the minimum trade line requirement when the borrower provides written documentation (e.g., canceled checks, payment receipts, etc.) that he or she has been the actual and sole payer of the monthly payment on the account for at least 12 months preceding the date of the application.
12.01.02 : Minimum Number of Credit Scores; and 12.01.03: Borrower Representative Credit Score
  • Updated to allow one valid credit score per borrower when the lender has requested credit scores from all three repositories and only one valid credit score is available.
12.04.01: Bankruptcy
  • All requirements were removed except for the Multiple Bankruptcy requirement. United Guaranty will align with the Agencies for all other bankruptcy requirements.
12.04.03: Short Refinance
  • Added this section to define a short refinance and clarify our requirements for a short refinance and a borrower who has been involved with a short refinance or restructured loan.
  • A Short Refinance is defined as any restructured loan where the original transaction has been changed, resulting in absolute forgiveness of debt or a restructure of debt through either a modification of the original loan or origination of a new loan that results in any of the following:
    • Forgiveness of a portion of principal and/or interest on either the first or second mortgage;
    • Application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness;
    • Conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage; or
    • Conversion of any portion of the original mortgage debt from secured to unsecured.
  • Any short refinance transaction is ineligible for insurance.
  • A borrower who has had a loan restructured resulting in a short refinance requires:
    • Four years' seasoning after the date of the restructure; and
    • 48 consecutive timely mortgage payments from the date of the restructure.
    • These requirements apply to both the subsequent refinance of a restructured loan and to a new purchase transaction.
  • All subsequent subsections in Section 12.04, Derogatory Credit have been renumbered.
12.05.02: Authorized User Accounts
  • Removed section. See section 12.01.01, Valid Credit Scores, for any restrictions on the use of Authorized User Accounts. United Guaranty will align with the Agencies for all other Authorized User Account requirements. All subsequent subsections in this section were renumbered.
12.05.02: Debts Paid by Business
  • Updated to require the borrower provide proof that the business has paid the obligation for the last 6 months (previously 12 months).
14.03: Condominiums
  • Updated to remove the requirement that all units in a two- to four-unit condominium project must be conveyed to purchasers who will occupy the property as their primary residence or second home. United Guaranty will align with the Agencies' requirements for two- to four-unit condominium projects.
14.03.01: Ineligible Condominiums
  • Removed section. Studio condominiums, condominiums less than 600 square feet, and live-work condos are now eligible when they are common for the area and similar comps can be obtained. United Guaranty will align with the Agencies' requirements for these type condominiums. We will also align with the Agencies' requirements for ineligible condominiums. All subsequent subsections in this section were renumbered.
14.04.01: Ineligible Cooperatives
  • Removed section. Studio cooperatives and cooperatives less than 600 square feet are now eligible when they are common for the area and similar comps can be obtained. United Guaranty will align with the Agencies' requirements for these type cooperatives. We will also align with the Agencies' requirements for ineligible cooperatives.
14.07:  Mixed-Use Properties
  • Removed section. United Guaranty no longer has additional requirements specific to this property type (previously limited to maximum 95% LTV). United Guaranty will align with the Agencies' requirements for mixed-use properties. All subsequent subsections in this section were renumbered.

A lender must already have an agreement in place with United Guaranty to use RAP.


HARP Loan Modifications - Annual Renewal Premium Calculation Clarification
(see previous update, September 11, 2012)

United Guaranty has clarified its policy for Annual Renewal Premium calculations for HARP.

A HARP modification creates a new, original insured loan amount, so our Annual Renewal Premium schedule restarts with the new closing date. This eliminates the need for you to calculate the time remaining until the Year-10 premium rate change goes into effect. If a loan being modified is already in the 11th year, the annual renewal premium will remain at that rate for the remainder of the term.

To illustrate both outcomes:

  1. The premium schedule restarts if the coverage has not entered the 11th year:
    • United Guaranty receives a HARP refinancing request with a closing date of May 1, 2013. The origination date is July 11, 2005, and the original rate is .76 with a Year-10 renewal rate of .20.
    • The HARP modification will have an endorsement date of May 1, 2013. The rate will remain .76, but - because the loan is only eight years old - the renewal premium schedule will reset to remain in effect for 10 years from May 1, 2013.
    • In the 11th year, the rate will adjust to .20.
  2. The premium schedule remains the same if the coverage is already in or beyond the 11th year:
    • United Guaranty receives a HARP refinancing request with a closing date of May 1, 2013. The origination date is July 11, 2001, with a Year-10 renewal rate of .20.
    • When the HARP modification is processed, it will have an endorsement date of May 1, 2013.
    • The rate will not reset, but will remain .20 for the remainder of the term.

For more information on HARP annual renewal premiums, please visit this page. If you have questions or need further assistance, please contact our Customer Quality Center at 888.822.5584, Option 1.

Please contact your United Guaranty Account Representative if you have any questions concerning this announcement.

CA2013-04

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