icon Lender-Paid Single Premium: A QM-Eligible Option for Credit Unions

Because the premium for Lender-Paid Mortgage Insurance (LPMI) is paid by the lender, no MI cost is included in the QM 3% cap on points and fees for borrowers. The cost of the MI coverage is built into the mortgage rate, resulting in a slightly higher interest rate for the borrower.

LPMI is a QM-friendly and versatile option that has benefits for both the member and the lender.

MI puzzle pieces

Member Benefits

  • LPMI often results in a lower monthly mortgage payment when compared to a member-paid monthly option.
  • No MI closing costs.
  • May have tax benefits compared to member-paid monthly, which is no longer tax deductible. (For tax advice, borrowers should check with a tax professional.)

Lender Benefits

  • LPMI is not included in QM points and fees calculations.
  • Higher profit potential through secondary marketing execution based on a higher mortgage rate used to cover the up-front MI premium.
  • Enhanced servicing margins and income.
  • Can be sold as a "no-MI" loan.
UNITED GUARANTY PERFORMANCE PREMIUM®
Member-Paid Monthly Lender-Paid Single

$94
Monthly

$4,340
Up-front paid by lender

56 bps 217 bps

3.875%
Interest Rate

4.25%
Interest Rate

$1,033.80
Total Monthly Payment

$983.88
Total Monthly Payment

Monthly Payment Savings: $49.92

Assumptions: Base loan amount $200,000, two borrowers, both with 700 credit scores, 41% DTI, 30-year fixed-rate purchase loan, single-family house, stable market, 95% LTV. Performance Premium Pricing as of April 18, 2016.