Editor's note: Daniel A. Rabinowitz is co-chair of the Insurance Practice Group at Kramer Levin Naftalis & Frankel LLP. Alexander Traum is a law clerk in the firm's Corporate Department.
Various legislative proposals to abolish the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, the housing finance giants commonly known as Fannie Mae and Freddie Mac, could establish a new federal presence in the oversight of private mortgage insurance (MI).
Although they preserve state regulation over MI carriers generally, some of these proposed measures would require MI carriers to meet federal standards in order for the mortgages they insure to secure residential mortgage-backed securities (MBS) carrying a federal guarantee, as described below. MI carriers have historically been required to satisfy Fannie Mae and Freddie Mac-imposed eligibility standards in order to write coverage on mortgages aggregated by these so-called GSEs, or government-sponsored enterprises, but, generally, these have not been directly imposed or enforced by a federal agency.
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