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Government-sponsored enterprise (GSE) Fannie Mae announced Tuesday that it is starting a pilot program to offer an enterprise-paid mortgage insurance (EPMI) option – an alternative to the borrower-paid and lender-paid options currently available.

The EPMI option is part of the GSE's larger single-family credit risk transfer (CRT) strategy as it will transfer more risk to private mortgage insurance companies. NAFCU has been generally supportive of the GSEs' CRT initiatives, which are aligned with the association's core principles for housing finance reform.

The pilot program, which is similar to the integrated mortgage insurance (IMAGIN) pilot Freddie Mac launched in March, will allow Fannie Mae to exert more control over and streamline the mortgage insurance process. Under EPMI, lenders are not required to purchase mortgage insurance for loans with loan-to-value (LTV) ratios above 80 percent, which would simplify the process of selling loans to the GSEs. Fannie Mae is responsible for acquiring the insurance, filing claims and performing monthly reporting through the EPMI option.

EPMI could offer lower initial monthly payments for borrowers than the borrower-paid or lender-paid options. However, unlike borrower-paid, borrowers using the EPMI option cannot cancel their mortgage insurance when the LTV reaches 80 percent of the property value.

More details about the EPMI pilot program are available here. NAFCU will review the details and monitor the program for any possible impacts on credit unions.