The process of filing a mortgage insurance claim is about to get a lot easier thanks to with Fannie Mae, as the government-sponsored enterprise announced Wednesday that it is rolling out a new “streamlined” MI claims procedure with help from several of the largest MI providers.
Fannie Mae claims that the new process, which is calls MI Factor, will save time and reduce costs without adding any risk. According to Fannie Mae, MI Factor “delivers a streamlined approach to settling claims, significantly reducing the time, cost, and complexity of the process.”
Fannie Mae said that MI Factor makes it easier for mortgage servicers to file MI claims while also eliminating the need for supplemental filings. Servicers are therefore no longer billed for MI claim curtailments.
Fannie Mae also states that its new MI process will provide more transparency into claim timelines thereby providing servicers with more certainty and accuracy in forecasting claims and allocating their resources.
What powers all of this “streamlining” in MI Factor is an algorithm, which participating mortgage insurers will now use to estimate expenses when processing submitted claims.
According to Fannie Mae, MGIC, Genworth Financial, and Arch MI/United Guaranty are all signed on to participate in the MI Factor program.
As Fannie Mae notes, MI claims are split up into three parts: unpaid principal balance, delinquent interest, and foreclosure/property expenses.
And while the “expense” portion of the claim may be the smallest piece (usually around 5%), it generates the most work for “all parties involved” due to disallowances and curtailments, Fannie Mae said.
The new MI Factor process uses “factors” instead of the actual expense portion of a claim to estimate the expense portion.
Fannie Mae said that several MI companies have already signed on to participate in the program, which allows for an elimination of disallowances or curtailments.
Here’s how Fannie Mae explains it:
MI Factors are based upon paid expenses from last paid installment date to loan liquidation. These expenses are used in an algorithm that uses statistically significant loan characteristics to produce factors.
According to Fannie Mae, the factors have been “extensively tested” over the last 13 years and have performed as expected.
Fannie Mae said that the factors will be updated on a yearly basis in order to keep up with changes in the market.
For servicers, the bulk of their process for submitting an MI claim stays the same, but parts of it are about to get much easier.
According to Fannie Mae, servicers will continue to file initial claims and provide documentation to perfect those claims to the MI companies under the same timelines they do today, but will no longer need to submit supplemental claims, reconcile claims when settled, or go through the rebuttal process with Fannie Mae for curtailments on claims using the MI Factor.
As stated above, MGIC, Arch MI/United Guaranty, and Genworth are participating in the MI Factor program.
Fannie Mae said that while it anticipates that “most” MI providers will “eventually” be part of the MI Factor program, for now, it’s the status quo on new MI claims for all other MI companies.
If an MI company is not participating in the program, claims will be calculated the traditional way, including the requirement of supplemental claims, Fannie Mae said.
Also, for those MI companies not using MI Factor, the claim appeals will continue to be required as needed, and the curtailment billing process will continue, Fannie Mae added.
For more information on the MI Factor program, click here.