LTV Reduction, Limited Coverage & Increased Prices
Private Mortgage Insurance is insurance that you pay to a lender when taking a first mortgage above 80% loan-to-value. The insurance is intended for the mortgagees protection in the event that the mortgagor cannot repay the loan financed.
For more on Mortgage Insurance & Tax Deductibility, click here.
Here's the latest update from one of our Lenders (Flagstar Bank) and I'm sure many will follow suit.
"Effective for all new registrations on or after December 6, 2007, maximum financing LTV/CLTV will be reduced by 5% for any transactions where the property falls in a declining market.
Existing registrations in declining markets must be submitted to Underwriting with an appraisal by December 17, 2007 and must close by December 31, 2007 to be eligible for maximum financing.
A property is considered to be in a declining market if:
- DU findings return messaging stating that the property is in a declining market, OR
- Appraiser marked home values as "Declining" in the neighborhood section of the appraisal, OR
- The property is in one of the counties defined by Flagstar as being in a declining market. Flagstar’s declining markets list follows this memo and is posted in the Electronic Seller’s Guide under Doc. #6140.
The declining market policy applies to all agency, non-agency, delegated and bond programs. At this time, it does not apply to FHA transactions. Mortgage insurance companies and certain loan programs may have different declining market restrictions; please consult their respective guidelines for details."
Here's why I say others will follow... MGIC Investment Corp. is the nation's largest mortgage insurer. On Friday, they announced plans of raising prices and limiting their coverage ratios to those borrowers with: (1) bad credit, (2) those termed higher-risk loans.
The maximum loan-to-value will be capped at 95% for areas like California and Florida (those deemed declining markets). This is applicable to loan programs like HOME POSSIBLE and My Community which were previously offering 100% financing solutions for borrowers.
Loans exhibiting layered risk (low FICO & high LTV) will pay more!
"Where there's multiple risk layering going on is where most of these restrictions are coming in..." MGIC's Michael Zimmerman
For more on details on these changes, you can email me at ricardo (at) ricardobueno (dot) com or you can contact me here.
And if you've yet to subscribe to The Industry Report, you can do so by clicking here!
Comments