CAS Mortgage Insurance Primer Presentation
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MI Requirements and Example Payment Calculation
All loans in CAS deals with original loan-to-value ratios greater than 80% are required to have mortgage insurance
(MI) in place provided by one of 7 approved and active mortgage insurance companies
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Borrower-paid MI: the borrower makes a monthly payment as part of his/her mortgage payment
Approximately 85% of MI is borrower-paid. Monthly MI payment is typically 7% - 7.5% (¹) of the
borrower's total mortgage payment at loan inception. MI coverage automatically terminates when the
loan reaches a certain 78% LTV (and can be canceled by the borrower in other circumstances).
Lender-paid MI: the lender pays for the MI and charges the borrower a higher interest rate
Approximately 15% of MI is lender-paid. In accordance with GSE guidelines, Lender-paid MI cannot
be cancelled and must be maintained for the life of the loan.
If a loan goes to foreclosure (or deed-in-lieu or short sale), the mortgage insurance company is obligated to pay
Fannie Mae a benefit. This payment is passed through to the CAS investor as additional disposition proceeds and
reduces the loss.
LTV Range
Standard MI
Coverage %
(30-year Mortgages)
95.01 -97.00
35.0%
90.01 95.00
30.0%
85.01 -90.00
25.0%
80.01 - 85.00
12.0%
Example CAS Loss Calculation
Defaulted UPB: $
Lost Interest: $
Expenses: $
Total Indebtedness: $
Net Sales Proceeds: $
Gross Loss: $
MI Benefit: $
CAS Investor Net Loss $
(100,000)
(5,000)
(5,000)
(110,000)
80,000
(30,000)
27,500 (MI Coverage: 25%)
(2,500)
Note: most loans have "standard" coverage; however, levels may
differ on some loans - this is disclosed on the loan-level deal file
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If the mortgage insurance company fails to pay a claim per their contractual obligation, Fannie Mae will step in and
cover the MI contractual benefit amount on that loan. Investors are not exposed to mortgage insurance company
counterparty risk.
(1) Given the following key assumptions: 90% LTV, 740 FICO, MGIC Mortgage Insurance rates (44 bps for a 740 FICO loan)
CAS Mortgage Insurance Primer Presentation
10/18/2017
© 2017 Fannie Mae. Trademarks of Fannie Mae.
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