MGIC declares Pierce County a “Restricted Market”

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

Private Mortgage Insurance deduction extended through 2010

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Included in the Mortgage Forgiveness Debt Relief Act that President Bush signed just before Christmas is the continuance of being able to deduct private and FHA mortgage insurance if you meet certain criteria through 2010. 

  • The mortgage must be used for "acquisition indebtedness" which means for purchasing your home or a refinance doing substantial improvements.  This also includes refinancing the mortgage you used to purchase your home, however the amount is based on what the original loan amount was when you purchased your home.
  • The deduction applies to "qualified residences" which is your primary residence and a second home that is not a rental.
  • Adjusted gross incomes up to $109,000 qualify for the deduction.  Adjusted gross incomes of $100,000 or less are allowed to deduct 100% of the allowed pmi.  AGI’s of 100,000.01 – $109,000 are on a sliding schedule (the higher the income, the lower the deduction).
  • You must itemize your taxes in order to obtain the deduction (you need to do this in order to claim your mortgage interest deduction as well).

Consumers should meet with their Mortgage Professional to help them consider all options before selecting a mortgage. 

FHA jet setting towards Modernization

250pxjetsonsmeetflintstones The Senate overwhelmingly just passed the FHA Modernization Bill with a 93-1 vote.  If enacted, this will bring dramatic changes for FHA insured mortgages including increased loan limits and reduced down payments. 

HUD has been chomping at the bit to have FHA become more "modern" for quite some time.  In April of 2006,  Brian Montgomery Assistant Secretary of Housing stated,

"The bill itself is really very simple, the proposal straightforward. It does just what its name suggests: it modernizes the 72-year-old Federal Housing Administration and restores the agency to its intended place in the mortgage market."

The Senate and House both have different versions of the bill.  I’m betting the President will be approving the FHA Modernization Act into law possibly by the end of the year. 

FHA has always been a great resource for home owners and home buyers alike.   For more information on FHA mortgages, please check out my FHA Resources page.

Why you should make sure your condo is on the FHA approved list

Approved

Editors Update: Loan limits are different than what’s reflected below from when this article was originally written.  Check with your local FHA approved Mortgage Originator to see what your loan limits are (or click on the link in the second paragraph).  

[Read more…]

Please Don’t Neglect Your Unhealthy Mortgage

ErToday I received a phone call from a CPA who was trying to help her clients who have a "toxic mortgage".   She was hoping I would be able to save them…there was a time that I probably could perform a "rescue".   In fact it was just a few months ago before the current mortgage melt down.   Believe it or not, when applied correctly, subprime mortgages could mean the difference of someone being able to save their home assuming they were able to be disciplined enough to keep (or get) their finances healthy.  This family will not qualify for FHA or FHASecure (they don’t have an ARM that’s adjusted).   What they need is a subprime (now known as "non-prime") mortgage to buy them a little time.   Now their time is running out.

Part of their problem began with working with an unsavory loan originator who is now out of the business.   The LO brokered their loan to a subprime company I would not work with.  (Even though we’re approved with around 80 lenders, give or take depending on the day, I tend to select 5 preferred prime lenders and 3-5 subprime/alt-a…this lender was not on my list of preferred). 

Shortly after closing, their lender informed them that they did not have home owners insurance…they did.  They provided documentation showing their insurance to the lender.    The lender did not respond and instead, ordered insurance for them at a hefty price…jacking up their payment beyond what they can afford.   Now they’re sliding down a very slippery slope and the lender is not cooperating.   They are behind on their mortgage a couple months.  They called out for help too late.   

NOTE:  Other lenders may be more willing to cooperate with homeowners…you need to act quickly and contact your lender if you’re having difficulty with your payment. 

Homeowners:  the very moment you think you may be having trouble with your mortgage or debts, please contact your Mortgage Professional right away.   If you don’t have one, you can always contact your CPA or other trusted financial advisor for a referral.   Please don’t wait until you have a "mortgage emergency"…get help, even if you just have the sniffles.

Trusted Advisors (Real Estate Agents, CPAs, CFPs, etc): Please keep an ear out for your clients who may have adjustable rate mortgages or are may be having difficulites with their mortgage payment.   Even if an ARM isn’t scheduled to adjust for 12 months or more, the sooner someone meets to with a Mortgage Professional to make sure their credit and everything else is in line to restructure the mortgage (if needed), the better for all.

All home owners should meet with their Mortgage Professional at least annually to have a "mortgage check up" or Annual Review.   This is a service that I provide to my clients.  I’ll provide more information about the Annual Mortgage Review in a separate post.   

My point is, the more time you allow yourself to fix a "sick" mortgage situation, the better your odds are of finding a cure.

You don’t need 20% down to buy a house: 100% and 97% LTVs

In light of the tightening guidelines in the mortgage industry, I can understand how a consumer might think they need to save up a hefty down payment to purchase a home.   The fact is, there are many programs available that allow minimum down payments.   Here’s a small sample:

Conventional

Fannie Mae and Freddie Mac both offer 100% loan to value programs with either LPMI (lender paid mortgage insurance) or monthly private mortgage insurance.  Conforming loan limits do apply (currently $417,000 for a single family dwelling).   620 minimum credit score.   These programs may allow gifts from family as well.

FHA

The down payment for a FHA insured mortgage is approximately 3%.  Sellers can contribute up to 6% as long as the buyer is investing a minimum of 3% into the transaction.    Gifts from family are acceptable for the entire down payment and closing costs.   Loan limits do apply.   Very competitive interest rates with low monthly mortgage insurance (upfront mortgage insurance is financed into the loan).   FHA mortgages do not use credit scores (it does consider credit history) and do consider alternative credit for borrowers who have not established a credit history.

VA

The original zero down loan created for Veterans.   Sellers can pay all of the closing costs if negotiated in the purchase and sale agreement (also referred to as "double zero down").  Interest rates are very competitive with conforming rates.  There is an upfront VA funding fee that is typically financed into the mortgage.  There is no monthly mortgage insurance.   

To find out if you qualify for one of these programs, contact a qualified Mortgage Professional in your area.   Be wary of any lender who instantly steers you away from FHA or VA financing.  This could simply be a case of them not being an approved lender and therefore they’re not able to offer it.

Regardless of what the underwriting findings are on any of these loans, when you’re buying a home, I strongly recommend that you have a minimum of 3-6 months of savings available in your accounts after closing.   Life happens…even when you own a home and it’s best to have an emergency cushion in the event you need it.

Should I refi my VA loan?

A gentleman from Bremerton called me wondering if he should refinance out of his VA adjustable rate mortgage.   The start rate is 5.125%, however it’s scheduled to adjust in a few months.   VA ARMs (and FHA) have the best caps available at 1%.  The most his ARM could adjust worse case scenario would be to 6.125%.   And his VA loan does not have any mortgage insurance (unlike an FHA loan, which could possibly justify refinancing).

He’s also considering possibly selling in a year or so. 

The adjusted rate is very close to what I could currently offer him with a new conventional loan (a new VA loan would provide a higher rate).   If he was considering living in this home "forever" and the thought of having an adjustable rate mortgage was causing him emotional grief (low risk tolerance); then I might recommend a different strategy.

His estimated mortgage balance is $224,000.   I did not ask if the existing ARM is a 3 or 5 year fixed (I was driving during our conversation).    Here’s some figures to consider:

  • Worse case adjusted principal and interest payment for 5/1 VA ARM @ 6.125% = $1460.40 (amortized for 25 years). 
  • Worse case adjusted principal and interest payment for 3/1 VA ARM @ 6.125% = $1378.97 (amortized for 27 years).
  • Conventional mortgage refinance (assuming 80% loan to value; which offers a better rate than a VA 30 year fixed) principal and interest payment @ 6.000% based on a loan amount with closing costs financed: $1378.40. 

If the VA borrower has the 5/1 ARM scenario, it would take him just over 4 years to break even on the closing costs of the new refinance.   If the VA borrower has the 3/1 ARM scenario, it would take over 9 years to break even using the conventional refinance.   

What would you recommend?

Mortgage Master is approved for FHASecure!

UPDATE:  EFFECTIVE ON FHA CASE NUMBERS ISSUED AFTER DECEMBER 31, 2008, THIS PROGRAM IS NO LONGER AVAILABLE.

Since Mortgage Master Service Corporation has been a FHA endorsed lender since our inception, we are also approved for FHASecure.  This program is designed to help home owners who after their non-FHA ARM resets, have become delinquent.   

Here's more info:

  • The mortgage being refinanced must be an adjustable rate mortgage that has adjusted (reset).  The mortgage being paid off cannot be a FHA mortgage.
  • The home owners mortgage payment 6 months prior to the reset must show no instances of making late mortgage payments.
  • Missed mortgage payments may also be included in the new loan (subject to having enough available home equity).
  • The reset of the non-FHA ARM monthly payment must be what caused the home owners inability to make their monthly payments.
  • The home owner needs to qualify for the new FHA mortgage (have sufficient income and resources per FHA guidelines).
  • Loan amounts are subject to current FHA Loan Limits
  • Subordinate financing (non-FHA second mortgage) is allowed if the new FHA loan is not enough to pay off the existing first lien, closing costs and arrearages.   
  • Expanded loan to values up to 97.75%.
  • Payment-to-income-ratio and debt-to-income-ratios remain at 31/43.
  • FHA upfront and monthly mortgage insurance applies.
  • Loan applications must be signed no later than December 31, 2008.

This program is not intended for home owners to stop making their mortgage payments once their ARM adjusts.   In fact, this is straight from the HUD Mortgagee Letter 2007-11:

"FHA reserves the right to reject for insurance those mortgage applications where it appears that a loan officer or other mortgage employee suggested that the homeowner could stop making their payments…"

I'm pleased to be able to offer this program and thankful that Mortgage Master has maintained their status as a HUD Approved Mortgagee. 

The best option is to refinance prior to your ARM adjusting (before you're delinquent).  As always, I suggest that you contact your Mortgage Professional if your ARM is scheduled to adjust within two years or less in order to make sure you're in the best position possible to refinance.