May 7, 2021 2021-05

Maximum Insurance Deductibles Increased and Clarification of NEXTDown Loan Amount Calculations

1.    Maximum Insurance Deductible Increased

MFA is committed to minimizing the financial burden of our borrowers while helping protect the long-term viability of their homes and subsequently, their home equity.

We recognize that borrowers sometimes have difficulty affording premiums for hazard insurance policy if the deductible is too low. Therefore, to help ease the financial burden for our borrowers, we are increasing our maximum allowable deductible amounts, effective immediately.

The following represents the maximum deductibles accepted by MFA. It is important to note that participating lenders are required to meet agency guidelines regarding insurance deductible requirements for the loan type that is being delivered.  Otherwise, the loan is considered unsalable, and MFA will not authorize the loan purchase.

HAZARD INSURANCE:
Minimum coverage amount: Equal to the loan amount or replacement cost.
Maximum deductible amount: 2% or $2,500.00, whichever is greater.

FLOOD INSURANCE:
Minimum coverage amount: Equal to the loan amount or replacement cost.
Maximum deductible amount: $5,000.00

WIND/HURRICANE INSURANCE:
Minimum coverage amount: Equal to the loan amount or replacement cost.
Maximum deductible amount: May not exceed the higher of 2% or $2,000.00 of the face amount of the dwelling coverage.

When purchasing hazard insurance policies, borrowers should carefully consider the cost of insurance premiums and the insurance deductibles, based on their unique financial circumstances. This would include the need to consider their ability to pay high deductibles should they need to make a claim.

Lenders should encourage their borrowers to shop for the most affordable policies available and to make regular contributions to their savings to help cover unexpected costs.

2.    Clarification of NEXTDown Loan Amount Calculations
 
Lenders may reserve loan amounts that include the cents, may round up or may round down to the nearest dollar. The NEXTDown loan amount is 3.00% of the total (including any upfront MIP) loan amount of the NEXTHome first mortgage.

When submitting NEXTHome/NEXTDown rate locks, lenders must input the NEXTDown DPA loan matching the amount referenced on all related underwriting documents.

Lenders requesting loan amount changes after submitting a lock confirmation must email singlefamily@housingnm.org and allow one full business day for the request to be fulfilled.

We respectfully remind lenders to verify all information, including loan amounts, prior to requesting a lock.

Should you have questions please contact a member of the homeownership department at 505.843.6880.

Thank you for participating in MFA programs.