October 30, 2013
Credit Union Announcement CAU 2013-12: Credit Union Underwriting Requirement Changes (DU/LP) and New Credit Union Underwriting Guide - Effective November 4, 2013
Effective with mortgage insurance applications received on or after November 4, 2013, United Guaranty has expanded its credit union underwriting requirements for loans that receive certain Desktop Underwriter (DU) or Loan Prospector (LP) recommendations. These new requirements are reflected in our new Credit Union Underwriting Guide (the Guide).
The new underwriting requirements and Guide are applicable to mortgage insurance (MI) applications submitted by lenders (the Insured) that are designated as a credit union or credit union service organizations (CUSOs). They are not applicable to MI applications for which a credit union lender is a third-party originator (TPO) of the loan.
All United Guaranty systems that process new mortgage insurance submissions and rate quote requests will reflect these changes effective November 4, 2013.
New Underwriting Requirements for Loans Underwritten with DU or LP
United Guaranty has developed a unique set of underwriting requirements (detailed on the following pages) for loans receiving one of the valid DU or LP recommendations listed below. Loans meeting these requirements may be submitted either by Reporting Acceptance Program® (RAP® ) or full-file.
- DU Approve/Eligible
- LP Accept/Eligible
- DU Approve/Ineligible (for LTV or loan amount only)
- LP Accept/Ineligible (for LTV or loan amount only)
United Guaranty does not approve applications for mortgage insurance based solely on the Agency automated underwriting system (AUS) decision. Regardless of the DU or LP recommendation, prudent underwriting and risk assessment should be performed by the lender on each loan. Due diligence is expected when reviewing loan documentation to detect any potentially derogatory or contradictory information which must be addressed.
Loans that do not receive one of the valid recommendations listed above, or do not meet the new requirements, must meet the requirements in Section 3 of the new Guide, Underwriting Requirements for Manually Underwritten Loans. Please refer to page 3 of this announcement for an overview of the new Guide.
Loan Amount, LTV, Credit Score, and DTI Requirements
The underwriting requirements below represent general eligibility limits, used in combination with United Guaranty's automated risk evaluation, Performance Premium®, to determine MI eligibility for each loan. Layering of risk attributes may affect the eligibility of loans meeting the general requirements.
|Occupancy||Transaction Type||Property Type||Maximum LTV/CLTV||Maximum Loan Amount||Minimum Credit Score||Maximum DTI|
Purchase & Rate/ Term Refinance
|1 unit, SFD/SFA, Co-ops, Condos||97%||$417,000||680||45%|
|2 – 4 unit||95%||$625,500||620|
|Cash-out Refinance||1 unit, SFD/SFA, Co-ops, Condos||95%||$625,500||620|
|Second Home||Purchase & Rate/Term Refinance||1 unit, SFD/SFA, Co-ops, Condos||90%||$417,000||620|
|Investment Property||Purchase & Rate/Term Refinance||
1 unit, SFD/SFA, Co-ops, Condos
Additional Underwriting Requirements
|DU & LP Response||
|Minimum Borrower Contribution||
Additional Changes for Manually Underwritten Loans
Additional changes to credit union underwriting requirements for manually underwritten loans, effective November 4, 2013, follow.
|ARM: Interest Rate Adjustment Periods||The minimum initial fixed-rate period or any subsequent interest rate adjustment period is 6 months. There are no maximum interest rate adjustment periods.|
|Maximum ARM Caps||
An ARM Cap is defined as the amount the interest rate may change in a specified period of time.
A biweekly mortgage is a mortgage for which a biweekly payment is mandatory per the Note or Rider and will continue throughout the life of the loan. Biweekly mortgages are eligible for insurance with United Guaranty.
New Credit Union Underwriting Requirements Guide
The new Guide includes requirements for both full-file and RAP submissions. There are longer two separate Guides for credit unions. Most of the requirements for full-file and RAP are the same; however when they differ, it is clearly identified. The Guide applies to all pricing methods.
The Guide has three main sections:
- Section 1 – Introduction and General Information applies to all loans and includes:
- Risk and Underwriting Philosophy.
- Fair Housing and Equal Credit Opportunity Acts.
- A new Submission Methods section, which describes both full-file and RAP and the advantages of each.
- Section 2 – Underwriting Requirements for Loans Underwritten with DU or LP. This section houses the new requirements detailed in this announcement. When a loan meets these requirements, the lender does not need to refer to Section 3 – Underwriting Requirements for Manually Underwritten Loans.
- Section 3 – Underwriting Requirements for Manually Underwritten Loans contains all the subsections and details found in our current RAP Guide. This section includes requirements for both full-file and RAP submissions When you have a loan that does not meet the requirements in this section, but you feel it is an acceptable risk, you may continue to submit full-file, and our experienced underwriters will evaluate the risk of each loan based on its own merit (unless included in the Ineligibility Matrix). This section applies to:
- All manually underwritten loans.
- Any loan not receiving one of the valid DU or LP recommendations.
- Any loan receiving one of the valid recommendations that does not meet all the requirements in Section 2.
Rate Runner® Quotes for Credit Union Lenders
These changes require enhancement of Rate Runner® —United Guaranty's online rate calculator—to indicate when your loan has been underwritten by DU or LP. This enhancement is underway and will be available soon. When the DU and LP information can be provided in Rate Runner, your loan will be evaluated using the applicable underwriting requirements.
In the meantime, you may receive a message providing general guidance for determining underwriting requirements and eligible MI submission methods. These messages will appear in the same location as they do today. Example messages include the following:
- “Full-file MI submission required unless loan meets United Guaranty's Credit Union DU or LP requirements.
- “See United Guaranty Credit Union Requirements for credit score and eligible submission method for 2–4 primary purchase or rate/term transactions.”
If you have questions, please contact your United Guaranty Sales Team.