The mortgage insurance industry is assessing the new Primary Mortgage Insurance Master Policy Guidelines. published last week by the Federal National Mortgage Association. but early indications are that the insurers can live with them.
"Our objective is to meet Fannie Mae's standards,' said a spokeswoman for PMI Insurance Co.. San Francisco, the third-largest company in the industry.
The guidelines were worked out after consultation with the insurers and are revisions of a policy adopted for use in Texas in 1984 and which had become the industry standard.
Following are the major features of the Fannie Mae guidelines:
"Good and Merchantable Title-Except when a mortgage insurer acquires a property, the insured need only show that it has acquired the borrower's rifle. free of any right of redemption. This had been the practice, though the early policy required more documentation.
Possession of the Property--While the 1984 policy requires delivery of the property to the insurer in every case, in practice this is only done when the insurer is considering acquiring the property and desires to inspect R. The guidelines conform to that practice.
Restoration--The 1984 policy requires the insured to restore the property to the condition at the time the insurance was issued even if the mortgage insurer would pay the specified percentage of the full claim amount and not acquire the property. The guidelines apply the restoration provision only in acquisition cases or ff the the casualty event was the main cause of the default.
Environmental--Environmental contamination that is physical damage and occurs while the insurance in force is treated as a restoration issue. Some post- 1984 policies deny coverage ff the environmental damage is too severe.
Timing Issues--The 1984 policy's definition of 'claim' entailed two concepts:timely submission of a written request for insurance benefits and submission of proof. Current policy uses the term "claim" and "perfected c]aim' to distinguish between the concepts. The guidelines specify the use of those terms.
The guidelines also specific that the 60-day period within which the claim is initially field but is suspended for any items requested within the first 20 days after initial review by the mortgage insurer.
If settlement doesn't occur within the 60-day period, simple interest will begin to accrue on the claim and the mortgage insurer's right to acquire the property will expire.
All claims must be paid with interest or denied within 120 days after expiration of the 60-day period.