MGIC declares Pierce County a “Restricted Market”

February 15, 2008 by 6 Comments

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. 

Filed Under: FHA, Investment Property, Mortgage Insurance

Are you occupying or not occupying? THAT is the question.

November 19, 2007 by 10 Comments

Lies

Telling a lender you’re going to occupy (live in) a property and then not doing so is a form of fraud.  I’m amazed at how people what steps people will take in order to shave a little bit off of their interest rate (NOO is roughly 0.5% higher in rate for a 20% down fixed conforming product).

Here are basic lender guidelines for what is considered "owner occupied":

  • You must live in the home for a majority of the year.   Typically, a borrower is agreeing to live in the property for a minimum of 12 months following obtaining a mortgage.
  • The home needs to be located within reasonable distance to your work.
  • The home should make sense with your family (is it large enough for your dependents).
  • You do not have a rental agreement on your "owner occupied" home.
  • You can only have one "primary residence".

Second or vacation homes have these guidelines:

  • Typically located in a "vacation" area and available for year round occupancy.
  • Should be approx. 50 miles away from current residence.
  • The property cannot have "time-share" interest and cannot be rented.
  • You can only have one financed "second home".

If your property does not meet the guidelines above, it may very well be considered an investment property (non-owner occupied) in the eyes of an underwriter.   Recently new guidelines became available that accommodate borrowers helping family members, such as The Family Opportunity Mortgage.

Many of the guidelines are up to underwriter discretion and plain old common sense.  If you are buying a home as "owner occupied", the lender is anticipating that you will live in the property. 

If you have other intentions, it’s important that you openly discuss them with your Mortgage Professional so that you don’t unintentionally commit lender fraud.

The FBI states on their press release from December 2005:

Mortgage Fraud is one of the fastest growing white collar crimes in the United States. Mortgage Fraud is defined as a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan….The borrower makes a few misrepresentations, usually regarding income, personal debt, and property value, or there are down payment problems. The borrower wants the property and intends to repay the loan. Sometimes industry professionals are involved in coaching the borrower so that they qualify. Fraud for Property/Housing accounts for 20 percent of all fraud

When you’re obtaining a conforming mortgage, at application and again at closing, you sign affidavits stating that you intend to occupy (or not to occupy) the property that is being mortgaged.    It is much better for you to be upfront and ask your Mortgage Professional if your situation meets the guidelines of an owner occupied property than to have the lender call your Note due, or worse…how about a little jail time?   

Filed Under: Investment Property, Vacation and Second Homes

Family Opportunity Mortgage…now at Mortgage Master Service Corporation

September 12, 2007 by 12 Comments

The Family Opportunity Mortgage helps families who are buying or refinancing homes for college students, elderly parents and disabled adult children.   Without this program, these transactions would often have to be considered as “investment properties” with higher interest rates and closing costs.   Now, it can essentially be treated as a primary residence.

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Filed Under: Family Opportunity Mortgage, Investment Property, Mortgage Tagged With: , ,
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