All insured Loans with MI application dates on or after October 1, 2014, are covered under the new Master Policy. Loans with MI application dates prior to October 1, 2014, are covered under the old Master Policy.
Although the Master Policy contains numerous enhancements, the changes to the “incontestability” provisions (now referred to as “Rescission Relief” provisions) which control when we are prohibited from rescinding coverage, and the provisions controlling what we may rescind for and the kind of evidence required (“Rescission Reasons”) are the most significant. With respect to Rescission Relief, under the Master Policy, Arch MI must give Rescission Relief on a loan (meaning that it cannot rescind coverage for anything other than knowing and intentional first party fraud) after a “Thirty-Six Month Test” is met. Arch MI will give the same Rescission Relief after the borrower timely makes the first 12 payments, but only after Arch MI performs an “Independent Validation” in which it reviews and approves Loan Quality and Property Value. With respect to Rescission Reasons, there are a number of definitions and provisions in the Master Policy that provide additional clarity and transparency. These include definitions of “Credible Evidence,” “Material Misrepresentation,” “Material Value Variance,” “Origination Error,” and “Harmless Error.” Section 3 of the Master Policy contains all of our, and your, substantive rights and obligations with respect to rescissions.
For a complete discussion of how rescissions are treated under the Master Policy, please refer to the Rescission Reasons and Rescission Relief page posted on this section of our site.
Under the Master Policy and Endorsements, Arch will give either 36-Month Rescission Relief or 12-Month Rescission Relief on two subject matters -- Property Value (meaning Arch MI will not rescind for a Material Value Variance), and Loan Quality (meaning Arch MI will not rescind for a Material Misrepresentation by a borrower, or for a Loan Origination Error).
36-Month Rescission Relief is automatically granted for Loan Quality and Property Value on all loans insured by Arch MI under the Master Policy that pass the First Thirty-Six Month Test. This means that Arch MI must give Rescission Relief on both subject matters after 36 months from the due date of the first loan payment, subject to the following 4 requirements tested at 36 months: (1) the loan is not in default; (2) all loan payments were made from the borrower’s own funds; (3) there were no more than two 30-day late payments and there were no 60-day late payments (servicer’s misapplication and/or non-timely application of otherwise timely Borrower payments do not count); and (4) there were no forbearance agreements or modifications of the loan in the first 36 months.
12-Month Rescission Relief will be granted for Loan Quality and or Property Value on any loan where Arch MI successfully conducts an Independent Validation on those subject matters. An Independent Validation with respect to Loan Quality means a review and validation of the origination file and the final HUD-1 and documents showing satisfaction of all funding conditions. An Independent Validation for Property Value means a review and validation of the origination appraisal. The specific requirements for Independent Validation for the two subject matters are included in the Master Policy Plus and Delegated Plus Underwriting Endorsements.
The chart below summarizes the available Rescission Relief under our Delegated and Non-Delegated Programs. The chart shows the Customer Type (Non-Delegated or Delegated), Type of Rescission Relief (Loan Value or Loan Quality), when the Rescission Relief is available (36 months or 12 months), what documents Arch MI must review to perform an Independent Validation and grant the Rescission Relief and what Master Policy documents you will need to hold in order for us to be able to grant the Rescission Relief.
Type of Rescission Relief
Master Policy Documents
(Automatic w/ Independent Validation)
Master Policy and Plus Endorsement
(With Closing Package and Independent Validation)
36 Months - Automatic
(Without Closing Package)
(Automatic Without Closing Package)
(With full Loan Origination file, Closing Package and Independent Validation)
Delegated Plus Endorsement
No later than six months after completing our review of the required documents, Arch MI will send a letter to the Insured for each loan advising whether 12-Month Rescission Relief has been approved for the loan.
Delegated files that have been subject to the post-close underwriting and granted 12-Month Rescission Relief will not need to be audited. Delegated files with 36-Month Rescission Relief will require audits as currently conducted.
Loans submitted as EZ Apps will receive 12-Month Rescission Relief for Property Value and 36-Month Rescission Relief for Loan Quality. Credit Unions wishing to receive the 12-Month Rescission Relief for Loan Quality Rescission will need to submit a standard fully documented loan file, the closing package including evidence all approval conditions are met, and the HUD-1.
Arch MI’s Master Policy requires that the Delinquency and Claims Reference Manual (“DCRM”) published on our website identify all the documents that may be required to be submitted with claims. Arch MI may only request documents specifically identified in the DCRM. For most claims, you will only be required to submit the following six documents with your claim: attorney chronology, collection notes, servicing notes, loss mitigation notes, current broker’s price opinion (BPO), and Loan payment history. You will only be required to submit additional documents listed in the DCRM if they are needed to process your claim.
No. Coverage was automatically switched on October 1, 2014, for all Loans with MI Application dates on or after that date.
No. The GSEs have indicated that they will require use of the Master Policy in all approved states on or after October 1, 2014.