Mortgage Guaranty Insurance Corporation, a private mortgage insurance company, has included Pierce County as a "restricted market" limiting the loan to value to 95% for what they will insure effective March 3, 2008.
Private mortgage insurance is used when a borrower has less than 20% down and are not using a second mortgage to bridge the gap between the down payment and 80% loan to value. MGIC is just one of the big players in the private mortgage insurance industry.
From MGIC’s site:
MGIC has designated a number of Core-Based Statistical Areas (CBSA) as "Restricted Markets." A CBSA is the official term for a functional region based around an urban center of at least 10,000 people, based on standards published by the Office of Management and Budget. Loans secured by properties in these areas must follow MGIC’s Restricted Markets underwriting guidelines.
In determining whether to place a market on the restricted markets list, MGIC uses both external and internal information sources including OFHEO Home Price Indices, National Association of Realtors change in median home prices, Moody’s Ecomony.com home price projections and MGIC’s own proprietary business mix and performance data.
Here are other MGIC guidelines for restricted markets:
- LTVs of 90.01%-95% require a minimum credit score of 680.
- LTVs of 90% or less require a minimum credit score of 620.
- The maximum LTV for condominiums is 90%
MGIC will not insure the following in a restricted market:
- LTVs greater than 95%
- Investment properties
- Cash out refinances
It’s important to note that MGIC is not the only private mortgage insurance company. Other pmi companies are also restricting their guidelines. Effective March 1, 2008, PMI Mortgage Insurance Company will no longer insure mortgages with a loan to value of 97.01% or higher anywhere.
These changes will also impact LMPI (lender paid mortgage insurance) programs where the private mortgage insurance is financed into the rate as well as Fannie Flex programs depending on where your lender is able to obtain private mortgage insurance. As of this moment, 1:40 p.m. on February 15, I still have Flex 100 with LPMI.
The mortgage industry continues to tighten their guidelines as well. In fact, earlier this week, Washington Mutual declared most zip codes (including Seattle, Bellevue) in Washington state as "soft" reducing the amount they will lend by 5% of the total allowed loan to value.
This is a great case for using FHA mortgages if the current loan limit works for your mortgage needs.
If you are buying a home in Pierce County and are planning on putting less than 10% down, please contact your Mortgage Professional.
Update 5:37 pm 2/15/2007: You may want to read Kenneth R Harney’s article on MGIC.