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Predatory mortgage lending typically includes excessive or unnecessary loan fees, and often targets emerging market communities including minorities, lower-income families, and people with nontraditional, weak or blemished credit records. This practice drains wealth from families and communities, destroys the benefits of homeownership and often leads to foreclosure.
As a mortgage insurer, MGIC usually assumes the first risk of loss when it agrees to insure a loan. Not only are predatory mortgages bad for business, but they interfere with MGIC's corporate mission to facilitate homeownership and equity growth. The following policy statement attempts to identify criteria that might make a loan both unfair and risky.
MGIC generally will not be underwriting or performing audit reviews to evaluate compliance with this policy statement. A number of states have enacted laws prohibiting certain predatory lending practices, and we presume that loans made by lenders and submitted to MGIC for insurance will comply with those laws. However, if it comes to MGIC's attention that a lender is engaged in practices that violate either those laws or the eligibility standards below, additional procedures may be required to confirm compliance with those laws and standards. MGIC recognizes that although it prefers not to insure loans that do not meet its eligibility standards, some of those loans inadvertently might be submitted to, and approved by, MGIC or approved by policyholders with delegated underwriting authority, particularly since MGIC usually does not have access to information in the loan file that would indicate compliance.
MGIC will treat loans with the following characteristics as not meeting its eligibility standards:
If any law applicable to a loan prohibits any of the practices that also would violate any of these eligibility standards, the lender must not submit that loan to MGIC for insurance, because it is a loan that MGIC will not insure.