Private Mortgage Insurers Clamping Down on Mortgage Approvals

The largest private mortgage insurer's in the U.S. are raising their down payment and FICO score requirements for those looking for mortgage financing in “distressed markets” like the states of California, Florida, Arizona and Nevada and in many major metropolitan areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta. The changes were prompted by heavier than expected 3rd and 4th quarter claim losses and the anticipation of such claims continuing to rise in the foreseeable future.

Update! Additional Metropolitan areas added to the “distressed markets” list include the following locations:

Denver, the Maryland and Northern Virginia suburbs of Washington, D.C., Baltimore, Minneapolis, the Long Island and New Jersey suburbs of New York, Portland, Ore., and Tacoma, Wash.

Beginning in March, MGIC Investment Corp., the nation’s largest insurer will require 5% down payments for homes and 10% down payments for condos in these markets and minimum FICO scores of 680 for 90.01% to 95% LTV's and 620 for 90% LTV's or less. PMI Group Inc., the nation’s second largest insurer went even further and now requires 10% down payments across the board in these markets and will also stop insuring loans nationally for homebuyers with less than a 3% down payment.

Additionally, the following are also no longer eligible in Restricted Markets:

• LTV/CLTVs greater than 95%
• Expanded Criteria (A-) loan products
• Reduced Documentation (Alt-A) loan products
• Investment property loans
• Cash-out refinances
• Potential negative amortization loans, including Pay Option ARMs

Both companies also have announced that "all" new insured loans must meet the "declining market" policies set forth by both the lenders and the applicable agencies (FNMA or Freddie Mac) at the time of origination if:

• The appraiser designates the secured property as being in a market having declining values and/or
• The loan receives a "Declining Markets" message from Desktop Underwriter® or Loan Prospector®

And so, the beat goes on in the mortgage industry. One step forward and two steps back.

Metro Mortgage Company is a federally regulated Mortgage Banker specializing in Conventional, Jumbo and FHA/VA mortgage loans throughout Florida.

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