Mortgage insurer Genworth Financial Inc. (GNW) said Monday it accepts Fannie Mae and Freddie Mac recent guideline changes for refinancing mortgages through the Home Affordable Refinance Program.
In mid-September, Fannie said it would waive repurchase claims on new loans if an appraisal is done, negating the need to worry about reps and warranties on the new loan.
Reps and warrants pose significant risks for mortgage insurers like Genworth, who are essentially agreeing to insure loan payments whenever a borrower defaults. Genworth believes the changes will encourage smaller lenders to participate in HARP.
Freddie also said in September it would end buyback risks on mortgages that meet the right conditions in terms of creditworthiness, marketability and fraud protection requirements. Repurchase risk remains for new servicers refinancing a mortgage financed by the GSEs.
Both Fannie and Freddie waived a requirement that forces lenders to verify that at least one of the borrowers possessed a source of income if the monthly mortgage payment changed by 20% or less after the refinancing.
The new requirement allows retail lenders to verify that a borrower has enough reserves to cover 12 months of the new mortgage payment.
Other changes include reduced documentation requirements and agreements that lenders won't have to verify a borrower's past or current income. The GSEs also agreed to waive requirements that they should look into large deposits on borrower statements.
HARP launched three years ago and since then Genworth has assisted more than 57,000 HARP-eligible homeowners, reducing payments about $200 a month on average, the insurer said.