New USPAP Q&As published March 6, 2025

[timd354]

Yes exactly. Your sellers are giving you what you accept.

First of all, we (and presumably other MI's) only give delegated authority to lenders that they have vetted pretty extensively and whose default rates are acceptable (we look at their financial and loan performance records very carefully). Secondly, we QA a huge number of loans each and every month, and any lender whose QA finding rates and/or default rates exceed our tolerances have their delegaed authoirty removed, or in extreme cases, have their ability to even submit non-delegated loans for insurance with as we don't insure loans for any lender who is not on our approves list and we have and will continue to remove lenders from our approved list. Additionally, the loan file on any claim that is submitted is audited and if the loan was approved by a lender using their delegated authority and the loan did not meet our underwriting requirements, we have the ability to rescind coverage and not pay the claim.

 

[glenn walker]

Two appraisers here assume most SC prices are "market value" - but we don;t all believe it - I like my appraisal to show me the market value and then I compare their SC price and if it is bracketed by my comps and the adjustments, then it is MV - otherwise a price can be below or above our MV opinion.

I knew the sales price versus value would trigger you...time to fire up that thread again along with the seperation of fees and the AMCs. It's the Russians they infiltrated the GSEs....lol

 

[Joe Flacco]

First of all, we (and presumably other MI's) only give delegated authority to lenders that they have vetted pretty extensively and whose default rates are acceptable (we look at their financial and loan performance records very carefully). Secondly, we QA a huge number of loans each and every month, and any lender whose QA finding rates and/or default rates exceed our tolerances have their delegaed authoirty removed, or in extreme cases, have their ability to even submit non-delegated loans for insurance with as we don't insure loans for any lender who is not on our approves list and we have and will continue to remove lenders from our approved list. Additionally, the loan file on any claim that is submitted is audited and if the loan was approved by a lender using their delegated authority and the loan did not meet our underwriting requirements, we have the ability to rescind coverage and not pay the claim.

Then I don't know what you are complaining about. Sounds like you are pretty happy with your process and what you are getting.

 

[TerryRohrer]

First of all, we (and presumably other MI's) only give delegated authority to lenders that they have vetted pretty extensively and whose default rates are acceptable (we look at their financial and loan performance records very carefully). Secondly, we QA a huge number of loans each and every month, and any lender whose QA finding rates and/or default rates exceed our tolerances have their delegaed authoirty removed, or in extreme cases, have their ability to even submit non-delegated loans for insurance with as we don't insure loans for any lender who is not on our approves list and we have and will continue to remove lenders from our approved list. Additionally, the loan file on any claim that is submitted is audited and if the loan was approved by a lender using their delegated authority and the loan did not meet our underwriting requirements, we have the ability to rescind coverage and not pay the claim.

Does the existence/determination of the initial QA have any bearing on the later decision on whether or not to rescind the loan, or is it just noted in case the need ever arises to deny a claim?

 

[timd354]

Ballpark, what is your decline rate on enterprise loans due to appraisal issues? Do you review every appraisal, or just non-delegated?

I am unable to provide information regarding our decline rates due to the appraisal issues since that is non-public inforamtion and some of our competitors may be reading thse posts. What I can say, is that is that the delcine rate is small, which is not suprising since the vast majoirty of residential appraisals are not inflated. Also, most lenders underwrite their loans before submitting the file for MI, thus many files with bad appraisals (or with other defects) are declined before we underwrite them, thus the pool of loans that we underwrite is not a random sample, but is a biased sample that likely has signficantly fewer defects than a random sample would.

Regading delegated loans, we don't underwrite those files before we insure them. However, we QA a signficant sample of delegated loans every month. We also QA loans that are submitted to us for a claim and we can and do rescind out insurance coverage if we finds singificant underwriting defects.

 

[timd354]

Then I don't know what you are complaining about. Sounds like you are pretty happy with your process and what you are getting.

I am not complaining about anything. However, I am always looking for ways to improve outomes and minimize defects.

 

[Joe Flacco]

I am not complaining about anything. However, I am always looking for ways to improve outomes and minimize defects.

That's great. How you do that is by looking at how you can improve your processes.

I was really confused because this whole thread seemed like you were complaining about the appraisals you were getting.

 

[Joe Flacco]

From my end I feel like the secondary market ecosystem really limits my pool of clients.

 

[CGinMN]

What I can say, is that is that the delcine rate is small, which is not suprising since the vast majoirty of residential appraisals are not inflated.

I figured it was very very small. But i thought something like 30% of appraisals are above contract while only 8% are below. What happens when you get a request for MI termination and the value hasn't gone up to the same degree as the markets, indicating the original appraisal was inflated? Not much you can do except keep collecting those MI checks I suppose.

 

[timd354]

Does the existence/determination of the initial QA have any bearing on the later decision on whether or not to rescind the loan, or is it just noted in case the need ever arises to deny a claim?

When we find QA defects, we have the choic of several options. For the most serious defects, we have the ability to rescind the MI coverage at that point. We also have the ability to reprice the cost of the MI coverage (for example, if the loan was submitted as a a primary residence, but it turns out the property is actually a second home or a rental property, we can tell the lender that they have to pay us an additional premium or the coverage gets rescinded). Alternatively, we can agree that coverage can remain in place if the lender agrees to indeminfy us against the defect (which means if the loan defaults becuase of that defect, we either won't pay the claim or we will reduce the paid benefit, but if the default is due to some other reason(s) that have nothing to do with the defect, then we will pay the claim in full). Finally, we can waive ours rights regarding the defect if we think the defect is not signficant enough to warrant rescission, especially if the borrower has an extended history of making timely payments. The one thing we cannot do is just sit on the defect and continue to collect premium and then later decide not to pay the claim or rescind coverage as that would be both unethical and would violate the terms of our master insurance policy, which governs the remedies we can pursue for loan defects.