March 26, 2014
Take Advantage of our RAP Underwriting Requirement Changes and Clarifications due to Improved Market Conditions and Credit Quality
United Guaranty is making changes and clarifications to our underwriting requirements. Most changes expand the loans we will insure and will be effective with MI applications received on or after March 31, 2014 unless otherwise noted.
In order to bring these improvements to the market quickly, we are temporarily asking you to use this announcement and the attached detailed supplements in conjunction with our existing Underwriting Requirement Guide (the Guide) for underwriting purposes. The updated Underwriting Requirement Guides (Full-File and RAP®) and supporting documents will be provided when available (planned for the end of April) at www.ugcorp.com. You will be notified when they are available.
Highlights of changes to the Performance Premium® RAP Guide (See Supplement 1 for complete details):
These expansive changes apply to all loans regardless of whether they are underwritten by Desktop Underwriter®(DU), Loan Prospector®(LP), or manually.
- Gifts/Grants - Loans meeting our requirements for gifts/grants to satisfy the minimum borrower contribution are now eligible for RAP submissions. The requirements will be added to the Guide.
- Property Flips where the seller has owned the property less than 180 days are now eligible for RAP submissions. All other Property Flip requirements continue to apply.
- Product Updates now eligible for RAP - To allow for non-Agency products, we have added requirements for ARM interest-rate adjustment periods, ARM caps, Balloon Mortgages, and Bi-weekly Mortgages.
Changes that Align with Fannie Mae's and Freddie Mac's (the Agencies) Requirements:
- Condominium Investor Concentration - Removing the maximum 30% investor concentration requirement for established projects.
- Construction-to-Permanent Loans
- Allow the use of the "as completed" appraised value to calculate the LTV, regardless of how long the lot has been owned, when it is allowed by the Agencies.
- No longer require the minimum borrower contribution to be documented for a rate/term refinance transaction.
- For single closing transactions, insurance is now allowed during the construction phase. The lender may choose to activate at the initial closing or upon modification to the permanent financing. Once activated, premiums will become due and payable. Documentation must be no more than 120 days old at the time of activation.
- Renovation Mortgages
- Allow the use of the “as completed” appraised value to calculate the LTV, regardless of how long the property has been owned, when it is allowed by the Agencies.
- Allow second homes to 90% LTV.
- Allow single closing renovation mortgages where the funds are disbursed in increments and interest-only payments are made during the renovation phase
Clarifications to the Guide:
- Clarified language for the use of DU/LP tolerances:
- For requirements in this Guide that are dependent on the DU/LP decision such as documentation requirements and reserves, the Agency’s resubmission tolerances are permitted for determining if DU or LP must be rerun, however all data supplied to United Guaranty must be the final accurate data.
Effective with MI Applications Received on or After April 28, 2014
The following clarifications are effective April 28, 2014.
- Reserve requirements for 2–4 unit primary residences (all loan amounts) and 1-unit primary residences with loan amounts $625,501 to $850,000, and the borrower is retaining their current primary residence have been clarified as follows:
- 6 months PITIA for both properties, unless 30% equity in the current property is documented, then 6 months PITIA for subject property and 2 months PITIA for retained property.
- The requirements for rural property comparable sales have been clarified as follows:
- Comparable properties should be in similar rural locations and be similar property styles. Appraiser must adequately explain the use of comps not meeting these requirements.
Performance Premium Full-File Guide:
All changes to the Performance Premium Full-File Underwriting Requirements Guide are clarifying in nature. There are no changes to the requirements. Please see Supplement 2 for details.
If you have any questions concerning this announcement, please contact our Underwriting Customer Service team at 877.MI.CHOICE (877.642.4642) or email UGC:customerservice or your Account Executive. This and all previous announcement can be found on www.ugcorp.com > Announcements or Click Here.