According to sources in the mortgage brokerage business, I have learned that effective immediately, Mortgage Insurance providers such as Mortgage Guaranty Insurance Corporation and AIG United Guaranty (two of the largest in the industry) will no longer offer mortgage insurance (PMI) for borrowers seeking 100% financing. This is a huge change. Without the mortgage insurance (PMI) the 100% financing product will no longer be available to borrowers. Most 2nd lenders have pulled out of the 80/20 loan business too. This means that borrowers are going to have to be prepared to make a down payment when doing a purchase contract.
These Mortgage Insurance providers have also increased their requirements for borrowers doing 97% financing (3% down payment); if the borrower does not have at least a 680 mid credit score they will not qualify for mortgage insurance. For borrowers whose mid credit score is below 620 there will be no mortgage insurance available, no matter if they put 10% or 15% down.
These changes pertain to Fannie Mae/Freddie Mac loans, not FHA.
Mortgage backed securities continue to have problems on Wall Street. Mortgages on clients with less than 20% equity in their property are some of the “least attractive” in the market. For that reason Lenders & Mortgage Insurers continue to increase the guidelines on these types of loans to make them more “attractive” to investors.
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... blogging from Kingwood, TX
