United Guaranty Corporation has announced that it has received notice from Freddie Mac that mortgage loans originated and closed using CoverEdge—the mortgage insurer’s underwriting process designed to significantly curtail mortgage insurance (MI) rescissions—are eligible for sale to Freddie Mac. With this development, the process will now undergo a national launch to select mortgage lenders. Fannie Mae had previously approved the process, and one national lender—River Edge, N.J.-based Real Estate Mortgage Network Inc. (REMN)—began pilot operations using CoverEdge in January 2012.
The process, which features a comprehensive credit and documentation analysis at loan origination and immediately after loan closing, addresses the factors that most commonly lead to denials, rescissions, and payment delays when claims are filed. These include lack of documentation, loan attributes changing prior to closing, underwriting issues, and fraud and misrepresentation.
“This completes the picture for mortgage lenders who want to adopt this product and sell to Freddie Mac,” said Kim Garland, United Guaranty’s chief operating officer. “Because CoverEdge loans are eligible for sale to both GSEs, lenders can apply the process to both Fannie Mae and Freddie Mac loans.”
According to Garland, despite serious consequences—including forced loan repurchases—related to previous mortgage manufacturing, processes have remained largely unchanged by the company’s competitors since the housing crisis began. This perpetuates a generation of loans that are problematic when they default. The CoverEdge pre- and post-closing reviews nearly eliminate all risk of rescission of coverage in the future.
“We believe that sale eligibility to both Freddie Mac and Fannie Mae will ignite broad market appeal for CoverEdge,” said Eric Martinez, United Guaranty's chief executive officer. “CoverEdge promises to change the way all parties—originators, insurers, and investors—examine risk, and that housing finance will benefit from it. We think this deeper scrutiny, which is a basis of our operating philosophy, will result in a safer and sounder mortgage industry.”
