Saturday, May 10, 2008
The Real Mortgage News
First, the entire states of New Jersey, Kentucky and Michigan go on the declining list (MGIC calls it restricted). Congratulations to the lucky winners!!! We know you worked hard for that honor....
Jumbos get hard hit. Max $ insurable amount is $650,000 or GSE buy. In a restricted market, max CLTV is 85%, whereas it is 90% in an unrestricted market. Min FICO for all markets is 700.
General: No cash-outs, no 3-4 units, no non-warrantable condos, no condotels, it looks like no EAs, no low-docs, no low-doc Alt-As, no option-ARMs. Min 5% dp, min 3% borrower funds on a purchase. No non-owner occupied. <720 requires two months PITI reserves.
If the appraiser describes the market as declining, the loan automatically goes into the restricted bucket. Also DU declining, or lender-identified declining. In other words, if the underwriter or appraiser IDs it as declining then MGIC IDs it as restricted. This is important, because it is unlimited, and because the lender cannot ignore the matter. If the loan ever defaulted and the lender hadn't used the right category, MGIC could and would refuse to pay.
The new restricted list (which automatically expands whenever a particular lender expands their own list) is here, and now contains either portions or the entire area of 30 (thirty) states.
The much-coveted distinction of having your entire state be restricted is still for a select few:
ArizonaOkay, okay, GA is not on that list. However, if you look at the MSA and county details, you'll see that GA is pulling long and strong, as are states like VA. So those of you who have won the laurel crown can not afford to rest easy on your laurels. We're right on your heels.
And do you receive for having made the list? There's a surcharge for your MI. DC is unaccountably not included in the surcharge list, possibly because it might irritate too many Congress Critters and/or their favorite prostitutes.
After looking at the list, I'd say that MGIC might write insurance for maybe 40-50 90% CLTV jumbos in the second half of 2008. Everything else will be at 85%.
You need a 680 credit score for a purchase or refi in restricted markets (700 for jumbo). There's an across-the-board surcharge of 10 bps for rate/term refis as of June. MGIC will no longer write any insurance for condos or attached housing in Florida.
Barney Frank was threatening lenders last week because jumbo rates were still so high; he'd better start threatening mortgage insurance companies. As it is these guidelines are still too lax in some markets. Sure, you get a $105,000 downpayment on that $700,000 home, but when it winds up defaulting in 2010 and selling for $450,000, that's a nasty loss. Hard to make a profit this way, and FICOs aren't going to help.
Barn Door. Horse. Gone.
They are just *now* getting around to this?
Now they're squeezing again.
But it has a big forward impact, especially on this theory that we'll just turn jumbos into conforming mortgages, and then lalalalala, everything will be fine again.
Because the GSEs want MI on these, and the terms the mortgage insurers over are going to control what's available through the GSEs.
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