Reduce Credit Risk

Why the mortgage insurance industry is shifting away from a delegated model.


Call it stress avoidance — or a quest for peace of mind.

These are the motivators behind the enormous shift many credit unions are making in their approach to mortgage insurance (MI).

As part of a quest to reduce credit risk, credit unions and other mortgage lenders have been turning away from a delegated underwriting model in favor of a proven approach that adds an extra layer of protection: full-file MI underwriting. This front-end review provides a second set of eyes to critically review the loan and help reveal instances of under-qualified buyers and ─ in rare cases ─ new and sophisticated forms of fraud.

Keeping The Past In The Past

Like many recent changes in lending practices, the move toward full-file underwriting by mortgage insurers grew out of the 2008 mortgage crisis. Delegated underwriting became a widespread practice among MI companies in the 1990s and into the next decade, and lenders developed new financing options requiring small down payments or no down payments at all, according to Carl David Reed’s Decoding the New Mortgage Market.  

Not only did MI delegation lead to billions of dollars in claims for MI companies, the delegation model also exposed lenders to rescissions and buybacks down the road. In too many cases, claim denials due to lost documentation forced lenders to spend valuable time searching for missing documents and piecing together details of loans made years earlier.

In response, lending professionals have begun to collaborate closely with their MI partner, which adds the expertise of MI underwriters to the origination process. By putting the focus on full-file underwriting, these lenders can avoid the heartburn that comes with rescissions and buyback demands by helping to keep flawed loans out of the system at the outset.

The Pioneering Approach Of Credit Unions

Many credit unions have been industry leaders in adopting this kind of preventive focus by either completely eliminating the delegated approach or reducing it substantially.

As more and more credit unions shift away from a delegated model, mortgage insurers have responded by streamlining the full-file review process to make it as efficient as possible. In recent years, United Guaranty’s own underwriting staff has tripled and the institution has invested millions of dollars in technology in order to complete full-file reviews in 24 hours or less.

Pricing Advantages

With risk-based pricing, credit unions also gain more accurate MI pricing in stable markets — for savings that can be passed directly to valued members with no additional fees or hidden costs. United Guaranty believes this alternative to traditional pricing can provide benefits to credit union members, reflecting their solid credit quality and the quality loans credit unions originate.

Ensuring Safety For Credit Unions

Combining a full, second-party MI underwrite with pricing that truly reflects the high quality of credit-union loans can ensure a book of business that holds few surprises. By identifying problems while they can still be solved, a comprehensive MI underwriting analysis can help lenders avoid hassles down the road and provide peace of mind about the future.

For more information about the benefits of full-file underwriting and member savings through risk-based pricing, contact Shannon VanSickler, vice-president — Credit Union Channel, at 303.829.5276, or call your United Guaranty account executive today.


About United Guaranty: United Guaranty Corporation and its subsidiaries provide innovative, quality risk solutions that help mortgage lenders remain competitive while generating a profitable and responsible book of business for their stakeholders. Products include first-lien private mortgage insurance and a suite of loan analysis and risk management tools. Distribution channels include national and regional mortgage bankers, credit unions and community banks, and builder-owned and Internet-sourced lenders. United Guaranty was established in Greensboro, North Carolina, in 1963 and has been a company of American International Group, Inc. (AIG) since 1981.

888.822.5584 |
United Guaranty Residential Insurance Company
United Guaranty Mortgage Indemnity Company
230 North Elm Street, Greensboro, NC 27401

United Guaranty is a marketing term for United Guaranty Corporation and its subsidiaries. United Guaranty and Performance Premium are registered marks. Coverage is available through admitted company only.




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