Cancellation or Denial by MI

Cancellation or denial of mortgage insurance due to fraud, misrepresentation or omission of a material fact, or for any other reason related to the eligibility of the mortgage for mortgage insurance Alleged breaches of these conditions may include questions around the validity of the lien, ownership of the loan, compliance with loan criteria stipulated in the sale agreement or with federal, state and local laws.In the case of loans sold to parties other than the GSEs, originators may be required to repurchase mortgage loans, indemnify or reimburse the securitization trust, investor or insurer for credit losses incurred on loans in the event of a breach of specified contractual reps or warrants that are not remedied within a period after notice is received. Reps and warrants associated with non-GSE transactions can vary and may not be as specific as those outlined by the GSEs. Alleged breaches may include fraud of a party to the loan transaction or misrepresentation of data provided to the purchaser or insurer. The latter could include a wide range of challenges to the presentation of information within the agreement of sale. Also, because many private transactions involve multiple investors, there is often a minimum threshold of investors needed before the trustee can pursue repurchase or other remedies. Generally, the contractual liability to repurchase typically arises only if there is a breach of the representations and warranties that materially and adversely affects the interest of the investor, or investors, or of the MI or other financial guarantor (as applicable) in the loan.Reps and warrants related to insurance, both for monoline/financial guaranty and mortgage insurance, may impact the stipulated reps and warrants with the purchaser or investor. For example, an MI company may rescind or deny coverage based on terms within the original insurance policy. Once an MI company rescinds insurance, a GSE can leverage the rescission decision to put the loan back to the seller. If the seller is not successful in its negotiation with the MI company, repurchase may be necessary.