Mortgage insurers turn down Fannie"s high DTI loans - Washington Post

Fannie Mae (OTCQB:FNMA) began relaxing underwriting standards to accept low down payments for mortgages with debt-to-income ratios of as high as 50% in recent times. This resulted in a 20% rise in loan application volumes of these riskier borrowers according to Fannie"s latest quarterly filing.

Insurers have fired back, saying these types of mortgages presented increased risk. "We"ve seen this movie before," says MGIC Insurance"s (NYSE:MTG) Mike Zimmerman.

Along with MGIC, Essent Guaranty (NYSE:ESNT) and Radian Guaranty (NYSE:RDN), all changed policy this month regarding these low down payment mortgages.

Fannie has since responded, acknowledging the issues raised on automated underwriting, and as a result approved fewer of these types of loans.