In order to have an effective mortgage program, your credit union must first execute many steps. Mortgage Insurance (MI) is one of those important steps. If done correctly, all parties benefit; your members gain the ability to obtain a loan with more options and better rates, and your credit union has some protection from risk. Genworth tracks the MI decision errors of their clients on a quarterly basis. Read Genworth’s report on this quarter below so that your credit union can avoid making these mistakes. Learn more at: www.nafcu.org/genworth

1. Top MI Decision Errors
1st Quarter 2012
Genworth’s Risk Quality Assurance function classifies MI Decision Errors into five (5) categories: Assets,
Credit, Collateral, Income and Program. The following matrix summarizes the Top MI Decision Errors by
category for 1st Quarter 2012.
Credit – Analyzing the Borrower’s Credit
Decision Error Genworth Underwriting Guideline Corrective Action
Insufficient Credit Section 5 Standard Guidelines for Borrower Underwriter must ensure Genworth,
References/Tradelines Eligibility (Credit History: Using Credit Scores) AUS and Investor documentation
requirements have been met.
Credit data should be requested for each borrower
from a minimum of two (2) repositories, three (3)
repositories are preferred.
• Minimum of three (3) tradelines, open or closed,
that have been evaluated at least 12 months.
• Credit scores not supported by the minimum
number of tradelines or do not meet the history
requirement must be submitted to Genworth for
underwriting. The traditional credit guidelines in
Section 5.6 will apply.
• Credit scores not supported by the minimum
number of tradelines or do not meet the history
requirement must be submitted to Genworth for
underwriting. Higher pricing will be applied if
additional credit references must be obtained from
sources outside of the credit report to meet the
minimum number and history requirement.
• All borrowers on the loan must have a valid credit
score. If not, submit the loan to Genworth for under-
writing. The traditional credit guidelines in Section
5.6 will apply.
• Authorized user’s tradelines may be used to count
towards the minimum tradeline requirement if:
– The owner of the account is another borrower on
the mortgage, or
– The account belongs to the borrower’s spouse, or
– The borrower has been the sole payer on the
account for the last 12 months and can
document those payments
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2. Assets – Analyzing the Borrower’s Assets
Decision Error Genworth Underwriting Guideline Corrective Action
Less Than Required Reserve Requirements Underwriter must ensure Genworth,
Reserves After Closing AUS and Investor documentation
Primary Purchase
requirements have been met for
• Two (2) months
verification and documentation
• 1 unit with > $417,000: Six (6) months
of assets. AUS assumes any assets
Insufficient Assets to Primary Rate/Term Refinance required will be verified and
Close and/or Pay Off • DU & LP: determined by AUS documented in file.
Required Obligations • 1 unit with > $417,000: Six (6) months
Example 1: The bank printouts
Primary Cash-out Refinance provided as documentation of assets
• DU & LP: determined by AUS did not contain the bank name and
were not signed or dated by a bank
Primary Residence – 2 units official.
Rental Income used to qualify – Six (6) months
Example 2: Borrower is short cash
Rental Income is not used to qualify
to close and 2 months of required
• Purchase: Two (2) months
reserves. Per the HUD-1
• Refinance: determined by AUS
Settlement Statement, borrower
Second Homes needed $17,502.75 in funds to close
• Two (2) months the transaction and $1,867.80 for 2
months reserves. Verified funds in
Reserve Requirements – Primary Residence file are for $15,361.39. Borrower is
Conversion short $4,009.16 in cash to close and
Current Primary Pending Sale reserves.
• 6 months for both properties Example 3: Missing documentation
• Reserves may be reduced to 2 months for both to evidence source of a large deposit
properties if there is a minimum 30% documented in the amount of $2,000.00.
equity in the existing property
The underwriter must investigate any
Primary Conversion to Second Home indications of borrowed funds. This
• DU & LP: determined by AUS but no less than includes recently opened accounts,
2 months recent large deposits, or account
• For all other loans: Six (6) months reserves for balances that are considerably larger
each property than the average balance over the
• Reserves may be reduced to 2 months for both previous few months. The underwriter
properties if there is a minimum 30% documented must obtain a written explanation of
equity in the existing property the source of funds from the
borrower, and must verify the source
Primary Conversion to Investment Property
of funds.
• 6 months for both properties
Assets Not Documented Section 1.6 Approved Automated Underwriting
as Required by Program Systems
or AUS Guidelines • Genworth will insure most loans that are processed
through Fannie Mae’s Desktop Underwriter (DU)
and Freddie Mac’s Loan Prospector (LP) automated
Source of Funds Not underwriting systems (Agency AUS). Our approval
Adequately or Properly is conditional on the loan being documented
Documented for Large according to the standards in the Agency AUS
Deposits finding or feedback.
(Refer to Section 1.6.1 for DU & LP requirements and
Genworth Guideline overlays)
Section 3 Documentation Requirements
Genworth generally accepts the documentation set
from DU and LP with a few overlays. Our policy for
manually underwritten loans is to:
• Follow Fannie’s guidelines when Fannie is the
investor or the Fannie Selling Guide is your standard
guideline set.
• Follow Freddie’s guidelines when Freddie is the
investor or the Freddie Sellers Guide is your
standard guideline set.
• Follow the more conservative of the agencies’
guidelines for all other situations, unless a specific
agency’s guideline is noted to follow for all others.
(Also, refer to Section 5 for additional details on Page 2 of 4
Asset documentation)

3. Collateral – Appraisal and Property Analysis
Decision Error Genworth Underwriting Guideline Corrective Action
Appraisal Form Not Section 1 Introduction Underwriter must ensure that
Obtained in Accordance Genworth follows Agency Appraisal Standards and AUS, Genworth and Investor
with Program or AUS Uniform Standards of Professional Appraisal Practice documentation requirements
Requirements (USPAP) guidelines. When Genworth’s underwriting have been met.
manual is “silent” and does not address a guideline,
• If the appraisal is incomplete, the
the lender must follow Agency Standard guidelines.
underwriter should request the
If you typically adhere to Fannie guidelines for under-
missing documentation and review
writing, follow Fannie’s Selling Guide when we are
prior to issuing loan approval.
silent. Likewise, follow Freddie’s Sellers Guide guide-
• The lender has ultimate
lines if you typically adhere to Freddie guidelines. For
responsibility of ensuring there are
all other situations, follow the more conservative of the
adequate processes in place to
agencies guidelines.
determine the accuracy and
• Interior/Exterior review (URAR) or 2055 Exterior completeness of the appraisal
Only, per guidelines below. report.
• The appraisal form and applicable addenda, such as • The appraisal should fully analyze
1004MC/Form 71, must meet Agency requirements the neighborhood, site, physical
• A Field Review (Form 2000/Form 1032) is required characteristics, and condition of the
for loan amounts > $625,500. property.
• Use of automated valuation models (AVMs), PIWs, • All adjustments must be fully
PIAs and desk reviews to obtain property values are supported with detailed analysis
ineligible. from the appraiser.
• All property evaluations must be completed by a • Sales agreements must be
licensed or certified appraiser. reviewed thoroughly to determine
• Appraisals may be 180 days, for newly constructed if consistent with appraisal:
homes, however, a re-certification of value must be - Parties to transaction
provided if the appraisal is more than 120 days. If the - Closing costs
value has declined, a new, full appraisal is required. - Personal property
• HARP-Eligible Refinance (Same Servicer): appraisal
may be 180 days.
Effective 5/2/11
• Form 2055 Exterior Only may be obtained if
permitted by DU or LP for the loan transaction
• A 2055 may not be used if the property is currently
in foreclosure or is an investor/institution/bank-
owned REO; a full URAR is required.
The appraisal must be upgraded to a full URAR by
the lender, or the upgrade may be requested by
Genworth, if any of the following conditions exist:
• Inspection of exterior of dwelling is reported to be
or appears to be in less than average condition
• Any 2055 ratings or narrative indicate adverse
conditions
• The contract or home inspection (if included)
indicate repairs are needed
Acreage Guidelines Section 6 Standard Guidelines for Property
Not Met and Appraisals
• We require properties with more than 10 acres
of land to be submitted to Genworth for
underwriting consideration.
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4. Collateral – Appraisal and Property Analysis
Decision Error Genworth Underwriting Guideline Corrective Action
Verbal VOE Missing, Section 3 Documentation Requirements Underwriter must ensure that
Incomplete or Incorrect For DU & LP Loans AUS, Genworth and Investor
• Follow the Agency AUS requirements. documentation requirements
• Use of a verbal VOE, when determined by an have been met.
Agency AUS, as the sole method of documenting
employment and income is not permitted.
For Manually Underwritten Loans
Verbal VOE is required as follows:
• Salaried borrowers: dated within 10 days of note
date
• Self-employed borrowers: dated within 30 days
of note date
(Also, refer to Section 5 for additional details
on Income and Employment Documentation)
For More Information
Contact us at action.center@genworth.com or 800 444.5664 for questions or to give us feedback.
Loan Prospector® is a registered trademark of Freddie Mac. Desktop Underwriter® is a registered trademark of Fannie Mae.
6161144.0412 ©2012 Genworth Financial, Inc. All rights reserved. Page 4 of 4