13VAC10-40-120: Mortgage insurance requirements

A. Unless the loan is an FHA, VA, or Rural Development loan, all borrowers are required to purchase at time of loan closing private mortgage insurance in such amount as required by the applicable investor or such other amount as required by the executive director. Such insurance shall be issued by a company acceptable to the authority. The originating lender is required to escrow for annual payment of mortgage insurance, unless an alternative payment plan is approved by the authority. If the authority requires FHA, VA, or Rural Development insurance or guarantee, the loan will be closed in the originating lender's name and purchased by the authority once the FHA Certificate of Insurance, VA Guaranty, or Rural Development Guarantee has been obtained. For assumptions of conventional loans (i.e., loans other than FHA, VA, or Rural Development loans), private mortgage insurance as described in this subsection is required unless waived by the authority.

B. The executive director may waive the requirements for private mortgage insurance in subsection A of this section for a loan having a principal amount in excess of 80% of the lesser of sales price or appraised value of the property to be financed if the executive director otherwise determines that the financial integrity of the program is protected by the financial strength of an applicant or the terms of the financing.

C. If the executive director determines it to be necessary to protect the authority's financial interests, the executive director may require that the company issuing such private mortgage insurance have a Moody's Investors Service Insurance Financial Strength rating not lower than Aa3 or a Standard & Poor's Ratings Services Financial Strength rating not lower than AA-.