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.
Dear Rhonda,
Did you read that horrible article written by Michelle Singletary of the Washington Post that appeared in Sunday’s Kitsap Sun.
In it she calls for criminal penalties to mortgage personnel, in fact the words she used were commando type enforcement division of HUD to be formed to go after anyone that mislead a homebuyer.
She says they (us mortgage Brokers)should be afraid of HUD as the average citizen is of the IRS.
Then she explains that YSP is a misunderstood concept, but it is a way for a Broker to put a borrower into a higher interest rate home loan so they Broker can make money on the back end of the loan. She further goes on to say that this is not an illegal practice but is a back end way for Brokers to earn more money.
I have been so upset I couldn’t slepp last night and since I enjoy your blog in the morning I thought I would make you aware of it.
I personally am formulatig an explanation to Michelle explaining to here the Mortgage Crisis she criticizes was in large part caused by special interest groups suh as the ones that she supports lobbying Congress, threatening, pressuring FNMA & FHLMC to make loans to more minorities and other individuals that would not other wise qualify for a loan. Earlier in the article she bashes us mortgage personnel for making these bad loans in the first place.
Then I am going to point out that as she says in her article it’s next to impossible for qualified applicants to get a mortgage now. What does she think that is going to do to the industry to turn HUD into a witch hunt organiation (which it already is in my opinion) If experienced lenders such as myself are so afraid of heavy fines and or prison time for making these loans. Does she not fear the industry will dry up and die all together.
Her article is full of misinforation and it’s inflamitory to the public. She has no clue what she is talking about and obviously she doesn’t know about SRP that banks make. YSP is not gouging the clients as if one looks at the par rate of all lenders. Mortgage Broker’s will make a YSP on par rate priced loans. What she is thinking is when some one charges “overage” from the par rate pricing and that is a totally different situation. She needs to stick to writing about things she knows about like ways to loose fact and excercise tips.
If you would like a copy of this article please contact me and I will be gald to scan it and send it via email.
Sincerely,
Steven B. Harkness
Net Broker/Sound Mortgage
License # 510-LO-32294
Steve, I’ve found the article and will give it a read. If a LO has committed fraud to a consumer, they should be worried. If not, they should be fine…although we are in a witch hunt (I wrote about this at Rain City Guide a few months ago). We’ll be seeing commercials from attorneys soon asking home owners if they paid YSP to a broker and encouraging them to sue.
Hi Steve,
In all fairness to the author of that article, she was quoting someone else, someone from the American Bankers Association, who was saying:
“new form does not explain “yield-spread premium,” although there is a place on the document to disclose this fee, which a lender pays a mortgage broker for putting a borrower into a home loan with a higher interest rate.”
But….isn’t that true? A homeowner pays a higher rate when the broker uses a yield, whether or not the broker is receiving his/her fee inside that yield and/or using the YSP to pay for costs.
The borrower is told, either pay a higher rate or you can pay the fees up front….
Her source was a banker so surely he’s not going to mention the bank’s yield.
The idea that HUD would come out and take us away to the federal pen is not anything I’m afraid of. The last time I personally saw a HUD auditor in this state was 1989.
Instead, we should be more worried about our own state DFI auditing our files. They ARE out there in full force.
Brokers and bankers will always disagree on YSP.
Many, many brokers mis-used YSP. We all know that. Unfortunately, the public will measure a profession by it’s lowest common demoninator, not by the folks who never mis-used YSP.
If an industry wants to stop this kind of reporting, the industry must decide that they’re not going to allow anyone in the industry to financially rape consumers any more, and then kick those people out of the industry.
There is not enough government resources to do this, nor will there ever be. The industry needs to do it ourselves. This is a 10-year project. It won’t happen overnight.
Jillayne, I’ll bet for every broker who abused YSP, there are mortgage bankers who did the same. What’s the difference? The broker has to disclose it.
Dear Rhonda,
Steve Harkness again and here we are in Feb, 2009. I wanted to know if you caught the 2 hour special of CNBC titled “House of Cards.”
Hey Steve, I caught the last half of it… what did you think of “House of Cards”?