Companies are always exploring new ways to leapfrog over their competition. But, now one of them is building a bridge, or maybe an arch, to by-pass their competition altogether.
Arch MRT, a newly formed sub of Bermuda based Arch Capital Group, is working with Freddie Mac to provide mortgage insurance directly to borrowers bypassing traditional private mortgage providers.
Under the new program, dubbed IMAGIN, lenders can apply for and provide their borrowers with needed private mortgage insurance through Freddie Mac for loans to be sold to Freddie. Arch then lays off 100% of the risk to reinsurers.
The MI companies cry ‘foul’. They say that in doing so, Freddie is blurring the lines splashing around in the primary mortgage market activities pool.
Further, they say that Freddie is not playing fair in requiring higher standards from the private MI companies than they place on their partner, Arch.
The MI’s say they are ready, willing, and able to serve homeowners and would like for Freddie to pursue alternatives to IMAGIN through the private MI’s. They believe Freddie, lenders, borrowers, and taxpayers are better served and protected in doing so.
Is this just another step by the GSEs into the primary mortgage markets? Doing such things as:
- New standardized, required online applications
- Elimination of appraisals
- Direct electronic verifications
- Reporting requirements for all loan data
- And now private MI
Do all of these point in the direction of the GSEs intention to enter the primary market as a direct lender?
They already have all the needed secondary market connections. They’ve automated the application, verification, and approval process and eliminated the need for appraisals. All that’s needed is a connection to a closing entity. The connections for online, real-time closings already exist.
How long before you are competing with Fannie and Freddie for your business? Is the delay in what to do with these entities buying the government time to explore more options of how to play in the primary housing finance markets?
Rather than offer some sort of guarantee, why not take over the whole enchilada? I know most do not agree with this premise; just another conspiracy theory. Maybe; maybe not. I hope we don’t find out the hard way.
What’s your take?
- Is it right for the agencies to dabble in certain areas of the primary market?
- Is it better for lenders, in the long run, to have the GSEs provide verification services?
- Should they be playing in the private MI arena?
- Do we really need appraisals?
How far does it go before consumers can apply directly to the agency to get their home financing?
Never mind, maybe these are just the rantings of a paranoid former lender. Maybe, it’s just time for some changes to how the business gets done. I guess we’ll find out over time.