FAIRWAY ADVANTAGE PROGRAM Lender Paid Mortgage Insurance

November 2018

Agenda

1 Types of

Mortgage Insurance

2 Pros and

Cons

3 Product Offering

4 LPMI

Process

5 Pricing & Locking

6 Product Codes

2

FAQs & Resources

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Types of Mortgage

Insurance

3

Mortgage Insurance is required on all loans with LTV over 80%. Borrower Paid (BPMI)

• Monthly – No premium is required at closing. Mortgage insurance premiums are included with borrower’s mortgage payment via escrow payments.

• Annual/Single – This is a one-time, up-front mortgage insurance premium. The entire premium is paid at closing. o The borrower paid single premium can also be financed into the loan

amount. • Split – This is a combination of both up-front and monthly premium. A part of

the mortgage insurance premium is paid up front, resulting in a lower monthly payment for the premium than a standard monthly premium.

Types of Mortgage

Insurance, contd.

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Lender Paid (LPMI) • Monthly – The lender does not collect a monthly mortgage insurance premium

from the borrower, but covers the cost by charging a slightly higher interest rate on the mortgage

• Annual – The lender may pay the single premium (LPMI Single), covering the cost of the premium by charging a slightly higher interest rate or discount points on the mortgage

• Split – Under these plans, a lender may increase the borrower’s note rate or charge discount points to cover the cost of the mortgage insurance coverage. A part of the mortgage insurance is paid upfront, or financed into the loan, and the rest of the mortgage insurance is paid monthly. This is to lower the amount of the monthly MI payments.

Financed Mortgage Insurance

• A portion (split) or all of the Single Premium is financed into the loan amount.

Pros and Cons

of LPMI PROs of LPMI CONs of LPMI

Eliminates Mortgage Insurance from the Borrowers monthly payment

A slight interest rate increase

May provide a lower monthly mortgage payment option for the Borrower Cannot be cancelled

May be included as an annual tax deduction It is not refundable

FAIRWAY ADVANTAGE LPMI

No waiting for the MI Cert prior to closing. The MI Cert is ordered after closing. Competitive Priced!

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Product Offering

Fixed Rate

High Balance

HomeReady

Fixed & ARMs (5/1, 7/1 & 10/1)

Super Conforming

Home Possible

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LPMI Process

• The LPMI Disclosure must be executed by the Borrowers with the initial disclosures.

• Fairway Advantage LPMI is obtained by Fairway. All adjustments for LPMI will be included in the rate.

• Once the loan has been underwritten the Fairway internal LPMI Condition will be added:

“LPMI – product code_________________. Cert will be obtained post-closing”

• There is no waiting for the MI Cert prior to closing. Once the loan is closed, Secondary will price the MI and post closing will obtain the MI Certificate.

11/20/2018 8

LPMI Process

Once you have imported the 3.2 file to create a loan, be sure that “Lender Paid Mortgage Insurance” is checked in Section I of the Loan Application.

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LPMI

Pricing/Locking

When Pricing or Locking the loan, be sure to select “No” in the “Borrower Pays MI” field in the First Lien Search Criteria section of Optimal Blue.

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LPMI

Pricing/Locking

The eligible products for the scenario will display at the top of the page.

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Product Codes

CONV FIX 30 LPMI - Fannie Mae

CONV FIX 25 LPMI - Fannie Mae

CONV FIX 20 LPMI - Fannie Mae

CONV FIX 15 LPMI - Fannie Mae

CONV FIX 10 LPMI - Fannie Mae

CONV FIX 30 High Balance LPMI - Fannie Mae

CONV FIX 15 High Balance LPMI - Fannie Mae

CONV FIX 30 HomeReady LPMI - Fannie Mae

CONV FIX 20 HomeReady LPMI - Fannie Mae

CONV FIX 15 HomeReady LPMI - Fannie Mae

CONV FIX 10 HomeReady LPMI - Fannie Mae

CONV FIX 30 HomeReady High Balance LPMI - Fannie Mae

Fannie Mae

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Product Codes

Freddie Mac

CONV FIX 30 LPMI - Freddie Mac

CONV FIX 25 LPMI - Freddie Mac

CONV FIX 20 LPMI - Freddie Mac

CONV FIX 15 LPMI - Freddie Mac

CONV FIX 10 LPMI - Freddie Mac

CONV FIX 30 Super Conforming LPMI - Freddie Mac

CONV FIX 15 Super Conforming LPMI - Freddie Mac

CONV ARM 5/1 LIBOR LPMI - (2.25 Margin 2/2/5 Caps) - Freddie Mac

CONV ARM 7/1 LIBOR LPMI - (2.25 Margin 5/2/5 Caps) - Freddie Mac

CONV ARM 10/1 LIBOR LPMI - (2.25 Margin 5/2/5 Caps) - Freddie Mac

CONV ARM 5/1 LIBOR Super Conforming LPMI - (2.25 Margin 2/2/5 Caps) -

Freddie Mac

CONV ARM 7/1 LIBOR Super Conforming LPMI - (2.25 Margin 5/2/5 Caps) -

Freddie Mac

CONV ARM 10/1 LIBOR Super Conforming LPMI - (2.25 Margin 5/2/5 Caps) -

Freddie Mac

CONV FIX 30 Home Possible LPMI - Freddie Mac

CONV FIX 20 Home Possible LPMI - Freddie Mac

CONV FIX 15 Home Possible LPMI - Freddie Mac

CONV FIX 10 Home Possible LPMI - Freddie Mac

CONV ARM 5/1 LIBOR Home Possible LPMI - (2.25 Margin 2/2/5

Caps) - Freddie Mac

CONV ARM 7/1 LIBOR Home Possible LPMI - (2.25 Margin 5/2/5

Caps) - Freddie Mac

CONV ARM 10/1 LIBOR Home Possible LPMI - (2.25 Margin 5/2/5

Caps) - Freddie Mac

CONV FIX 30 Home Possible Advantage LPMI - Freddie Mac

CONV FIX 20 Home Possible Advantage LPMI - Freddie Mac

CONV FIX 15 Home Possible Advantage LPMI - Freddie Mac

CONV FIX 10 Home Possible Advantage LPMI - Freddie Mac

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FWL Resources -

Guidelines

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FAQ

Fairway Advantage LPMI FAQ

Question: Answer:

Is there a specific MI

Company that is used?

No – LPMI is eligible through all Fairway approved MI providers.

How do I price LPMI? When Pricing or Locking the loan, be sure to select “No” in the “Borrower Pays MI” field in the

First Lien Search Criteria section of Optimal Blue. LPMI is built into Optimal Blue (OB) price.

Are there any new

Underwriting Conditions

for this new process?

Yes – Underwriting will add an internal condition as a reminder of the process for Fairway Advantage LPMI ordering: “LPMI---product code____. Cert will be obtained post-closing”

Do I add any information to

the LE or CD for LPMI?

No – LPMI is not disclosed on either the LE or the CD.

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Resources & Tools

Fairway Advantage LPMI FAQ

Question: Answer:

Is there a specific

disclosure needed?

Yes – As long as program name is an LPMI program and the LPMI Box is checked, the LPMI

Program Disclosure will be automatically added to your disclosure package for the borrower. The

LPMI Disclosure to the Borrower is the same process as it is today; nothing has changed.

Will I still use Lender

Credits to pay for LPMI?

No – the MI cost is built into the lock price and the MI is ordered after loan closing. Using Lender

Credits to pay for MI coverage will no longer apply.

Can the borrower cancel

LPMI?

No – The lender owns the MI policy and the MI is paid for through the cost of the loan. To

eliminate LPMI, the borrower must either refinance their loan, or pay their loan off in order to

terminate the coverage. The MI will otherwise remain on the loan, regardless of LTV.

Is LPMI tax deductible? Please advise your borrower to consult with a tax preparer / advisor for additional details

regarding this eligibility.

Is the cost of LPMI shown

on the lock confirmation?

No – the cost for LPMI is built into the base pricing received in OB.

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Questions