Contact: MICA (202) 682–2683
Email: pat@micadc.org
MICA’s “Second Look” Program To Expand Loan Modifications
Distressed Homeowners with PrivateMI Will Get Additional Help
WASHINGTON, D.C. July 27, 2009—The Mortgage Insurance Companies of America (MICA) today announced a new program to help troubled homeowners avoid foreclosure.
Working closely with the Housing Policy Council, loan servicers and the U.S. Treasury, MICA’s members are launching a “Second Look” Program to give borrowers an additional underwriting review if they have been turned down for a loan modification of a non-GSE mortgage.
The new program is designed to be used on any non-GSE loan modification where a so-called “net present value” (NPV) test is used to determine eligibility. These could include jumbo mortgages, loans on investors’ balance sheets and loans that were packaged into private-label mortgage securities.
An NPV test is one of the key drivers servicers and investors use when evaluating whether a distressed homeowner will be offered a loan modification on loans that are not owned or guaranteed by Fannie Mae and Freddie Mac. As constructed, many NPV models disadvantage loans with mortgage insurance, making it mathematically appear that a foreclosure is the best path. The new Second Look Program gives mortgage insurers an opportunity to help troubled borrowers remain in their homes.
“MICA’s member companies developed a process that will provide additional assistance to homeowners and investors by having the mortgage insurance company absorb part of the cost of the loan modification,” said Suzanne C. Hutchinson, MICA’s Executive Vice President. “Under the Second Look Program, loans that fail the NPV test are reviewed by the mortgage insurer to determine if it can provide an advance claim payment and permit the loan to be modified.”
“The Second Look Program will allow more homeowners to avoid foreclosure which in turn helps the housing market recover sooner than it otherwise would,” said John Dalton, President of the Housing Policy Council. “Servicers and mortgage insurers worked cooperatively to develop this solution.”
A servicer is permitted to submit a loan for the Second Look Program immediately after an initial determination of a failed NPV test, or after considering other modification programs allowed by the investor. The mortgage insurer will review the Second Look request to determine if a claim advance payment is appropriate.
MICA is the trade association representing the private mortgage insurance industry. Its members help loan originators and investors make funds available to home buyers for low down payment mortgages by protecting these institutions from a major portion of the financial risk of default.
During the last year, MICA’s members have helped nearly one million families save money by buying or refinancing a home with less than the traditional 20 percent down payment. Private mortgage insurance premiums are now tax deductible for many borrowers who purchase or refinance a home.