Seller servicers face repurchase demands when mortgage insurance coverage isn’t in place at delivery. A rise in mortgage insurance rescissions was cited for the policy.
By the time a mortgage with a loan to value in excess of 80 percent is sold to Freddie Mac, a primary mortgage insurance policy must have been obtained, the secondary lender explained in an industry letter Friday.
Freddie warned seller servicers that it will issue a repurchase demand if it finds that a mortgage insurance policy was not in force at the time of delivery. Also facing repurchase demands will be sellers on loans where the policy lapsed because of a rescission, claim denial or cancellation.
Sellers have the alternative of paying “make-whole funds” or providing proof of mortgage insurance in effect.
The clarification came as a result of increased mortgage insurer rescissions, according to the McLean, Va.-based company. Also on the rise are mortgage insurance cancellations and denials of coverage.
On repurchase demands dated May 31 or earlier, sellers have until Sept. 30 to complete resolution. For repurchase requests dated after May 31, the resolution time is outlined in the purchase documents.
Repurchase demands that aren’t paid within 120 days of the repurchase issuance date will be subject to a late remittance fee.