Now I’m not saying it’s true…..

but this story reminds me of the John Grisham novel, The Rainmaker.   Why?   Let’s just put it this way:   The insurance company in the Grisham novel made a practice out of denying every single claim that came in, no matter how valid they were.

Am I saying that the PMI companies are doing the same thing?   No, I’m not.   But there is an indisputable fact – PMI companies are denying a LOT more claims than they used to.

So what does that mean going forward?   A couple of things:

• If the PMI companies are denying claims because documentation wasn’t quite right, expect the paperwork requirements to increase on any deal that requires less than 20% down.
• If the PMI companies are experiencing higher and higher losses, expect PMI to become more costly.
• If lenders are finding claims being denied on PMI loans, expect a higher and higher standard for loans that require PMI.    It’s going to get more expensive and harder to get PMI loans.

So, if you are looking at getting a mortgage some time in the next 12 to 18 months and you will probably need mortgage insurance, I’d seriously look at whether you can move up your time frame.   It’s not going to get easier to get a mortgage with PMI (mortgage insurance) any time soon.

More later……

K

Growing Trend of Mortgage Insurance Claim Denials are Costing Servicers « HousingWire

Friday, February 26th, 2010, 4:26 pm

In the face of dwindling business, with January 2010 showing fewer new policies than any month in 2009, mortgage insurance (MI) companies are increasingly denying claims for defaulted loans that allegedly do not conform to underwriting standards, increasing costs for servicers and investors.

Historically, MI rescission rates were low, generally around 7%, but in recent quarters, that rate has jumped to 25%, associate analyst Aleksandra Simanovsky wrote in the Moody’s Investors Service latest “ResiLandscape” commentary provided to HousingWire.

According to Moody’s, the issue came to a head in December 2009, when Bank of America (BAC: 16.66 0.00%) filed a lawsuit against MGIC (MGIC: 1.80 0.00%), claiming the insurer improperly denied claims from BofA’s servicer unit. While the lawsuit is still pending, mortgage insurers are becoming more confident in denying partial or whole claims from servicers and Simanovsky wrote the industry can expect continued high rescission rates for the future. That increase, combined with the below-investment-grade ratings of MI companies such as Radian (RDN: 9.82 0.00%) and MGIC “further constrain any benefits we might allow to the pool policies in RMBS transactions.”

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Finally – some “leeway” for the housing market?

This is, I think, good news.   Let me explain….

• MGIC is one of the biggest private mortgage insurance companies in the country.
• They are facing very large losses and are running out of funds.
• As part of the restructuring, they are setting up a new subsidiary that will write new business.
• The state of Wisconsin (which I believe is where MGIC is headquartered) is being more lenient on their capital requirements until December of 2011 to essentially allow MGIC to keep writing new business.

If FHA is tightening up the rules, it is important to the health of the housing market that we have functioning PMI companies that will be able to help well qualified borrowers do a mortgage with less than 20% down.

The jobs report comes out in 45 minutes.   I’ll have a report on it as soon as I have the info.

Tom Vanderwell

Insurance Regulator Waives MGIC’s Capital Requirement : HousingWire || financial news for the mortgage market

The Office of the Commissioner of Insurance (OCI) in Wisconsin waived until Dec. 31, 2011 a requirement that Mortgage Guaranty Insurance Corp. (MGIC) — subsidiary of MGIC Investment Corp. (MTG: 4.63 0.00%) — maintain a certain minimum regulatory capital to write new mortgage guaranty policies.

It’s part of MGIC’s plan to continue to write new business partly through wholly-owned subsidiary MGIC Indemnity Corp. (MIC), which was recently capitalized by MGIC with $200m.

Technorati Tags: PMI, Mortgage Insurance, MGIC

A Private Mortgage Insurance Company Expands Eligibility?

That’s right, it appears that PMI the mortgage insurance company is expanding some of their guidelines.   Here’s a quick overview:

• It’s not for “distressed markets.”
• By “distressed markets” they mean California, Arizona, Nevada, Florida and Michigan and portions of many other states.
• They are increasing loan to values by 5%.

Now ask yourself, are they doing this because:

1. They believe the markets are past their worst and things are improving?
2. They believe that by doing that for the “non-distressed” markets, they can return to profitability and capture market share that is currently going to FHA?

My vote is on #2.

Tom Vanderwell

PMI Ups LTVs, Adds Mortgage Products to Insurance Plans : HousingWire || financial news for the mortgage market

PMI Group (PMI: 2.27 +8.10%) expanded its eligibility and underwriting guidelines for a number of loan products it insures, in many cases increasing maximum loan to value (LTV) thresholds.

Condominium mortgages can now by insured in non-distressed markets to a maximum 95% LTV. Previously, the maximum LTV was 90%. This new limit does not apply to attached housing in Florida. In distressed markets, the LTV maximum is 90%, up from 85%.

Technorati Tags: PMI Group, Tom Vanderwell, Mortgage Insurance

Why the Mortgage Market is Still Struggling…..

This is just another sign of the fact that the housing and mortgage market are still struggling.  MGIC, one of the main PMI companies, is stopping writing new PMI deal.   Why?

• As property values have been dropping, they are losing too much money on houses that are getting taken back.
• The premiums coming in are not enough to overcome those increasing losses.

So what does this mean going forward?  A couple of potential things:

• Tighter underwriting requirements for deals that are not FHA and have less than 20% down.
• Increasing costs for PMI going forward.

It ain’t over yet……

Tom Vanderwell

Mortgage Insurer Halts New Business; Posts Steep Loss – Earnings * US * News * Story – CNBC.com

Mortgage insurer MGIC Investment reported a wider quarterly loss and said it will stop writing new business as losses mount in the battered housing sector, sending its shares down 14 percent in premarket trade.

The largest U.S. mortgage insurer [MTG 4.4701 0.5301 (+13.45%) ] said it will wind down its business and try to capitalize a fresh enterprise that would write new loans beginning next year.

It said it hopes to win a capital investment from the U.S. Treasury but “cannot predict whether we will be successful in obtaining capital from any external source.”

MGIC aims to begin to capitalize the new company with $500 million by the end of July and intends to have the new business, Mortgage Indemnity Corp, replace MGIC.

PMI, MGIC

The 5 Most Important Things to Know About MGIC’s new Restricted Market Policy – Part #5

The way that it used to be was that the PMI companies would not have additional underwriting requirements above what the secondary market had. In other words, if it was good for Fannie and Freddie, it was good for MGIC.

Not so any more. Slipped into the middle of the “restricted market guidelines” is a small clause that says that if a borrower’s credit score is less than 720 (and a LOT of them are), then MGIC wants them to have 2 months worth of verified cash reserves.

So, your buyer who has enough for the downpayment but not much more, now has to have 2 months house payments in the bank when it’s done.

A little more difficult, but not an insurmountable issue for most.

Stay tuned for Part 6 of the Five things you need to know (I know you think I can’t count, but something new has popped up!)

If I can help you navigate through this real estate market, give me a call.

Tom Vanderwell
(616) 292-7559
Thomas.vanderwell@53.com

The 5 Most Important Things to Know About MGIC’s new Restricted Market Policy – Part #5

The way that it used to be was that the PMI companies would not have additional underwriting requirements above what the secondary market had. In other words, if it was good for Fannie and Freddie, it was good for MGIC.

Not so any more. Slipped into the middle of the “restricted market guidelines” is a small clause that says that if a borrower’s credit score is less than 720 (and a LOT of them are), then MGIC wants them to have 2 months worth of verified cash reserves.

So, your buyer who has enough for the downpayment but not much more, now has to have 2 months house payments in the bank when it’s done.

A little more difficult, but not an insurmountable issue for most.

Stay tuned for Part 6 of the Five things you need to know (I know you think I can’t count, but something new has popped up!)

If I can help you navigate through this real estate market, give me a call.

Tom Vanderwell
(616) 292-7559
Thomas.vanderwell@53.com

The Five Most Important Things to Know about MGIC’s Restricted Market Policy Part #3

Okay, here’s the 3rd installment on their new Restricted Market Policy:
1. For properties in Arizona, California, Florida, Kentucky, Michigan, New Jersey and Nevada, the cost of mortgage insurance is going up.
2. If the loan to value is between 90.01 and 95%, the cost went up by .15% (loan amount X .15% divided by 12 will give you the monthly increase.
3. If the loan to value is between 80.01 and 90.0%, the cost went up by .10%.

So, essentially MGIC is saying that since they feel these states are riskier, they want to get paid more for their risk.

If I can help you navigate through this real estate market, give me a call.

Tom Vanderwell
(616) 292-7559
Thomas.vanderwell@53.com

The Five Most Important Things to Know about MGIC’s Restricted Market Policy Part #3

Okay, here’s the 3rd installment on their new Restricted Market Policy:
1. For properties in Arizona, California, Florida, Kentucky, Michigan, New Jersey and Nevada, the cost of mortgage insurance is going up.
2. If the loan to value is between 90.01 and 95%, the cost went up by .15% (loan amount X .15% divided by 12 will give you the monthly increase.
3. If the loan to value is between 80.01 and 90.0%, the cost went up by .10%.

So, essentially MGIC is saying that since they feel these states are riskier, they want to get paid more for their risk.

If I can help you navigate through this real estate market, give me a call.

Tom Vanderwell
(616) 292-7559
Thomas.vanderwell@53.com

The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1

The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1

Okay, first question as we embark on an effort to communicate the changes that are going through the mortgage industry, who is MGIC? They are one of the largest mortgage insurance companies in the country and without them, many of the loans with less 20% down wouldn’t get made.

So, what’s a restricted market?

Essentially, a restricted market is one where MGIC has put different rules in play than they have for other areas of the country. Yes, it’s not a level playing field any more. The rules aren’t the same for everywhere.

How is it determined what a restricted market is? (4 ways)
1. MGIC says it is – see the end of this post for a list of where they have declared restricted markets.
2. Where the appraiser says the property values is declining (there’s a box on the appraisal where they have to check that property values are declining, stable or increasing).
3. Where either LP (Freddie Mac’s automated underwriting system) or DU (Fannie Mae’s automated underwriting system) identifies the property as in a declining market.
4. Where the lender identifies the area as a declining market (for instance, Bank of America could say, “All of Las Vegas is a declining market.”

What does that mean? Essentially two things:
1. There’s a higher risk to the loans in restricted markets because the property values are seen as potentially declining.
2. Therefore the rules and guidelines are tighter (and more expensive). More on that later.

Click here for a link to MGIC’s list of restricted markets. I’ll give you a hint, Michigan, Arizona, Nevada, Florida and California are on there – the whole state!

The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1

The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1

Okay, first question as we embark on an effort to communicate the changes that are going through the mortgage industry, who is MGIC? They are one of the largest mortgage insurance companies in the country and without them, many of the loans with less 20% down wouldn’t get made.

So, what’s a restricted market?

Essentially, a restricted market is one where MGIC has put different rules in play than they have for other areas of the country. Yes, it’s not a level playing field any more. The rules aren’t the same for everywhere.

How is it determined what a restricted market is? (4 ways)
1. MGIC says it is – see the end of this post for a list of where they have declared restricted markets.
2. Where the appraiser says the property values is declining (there’s a box on the appraisal where they have to check that property values are declining, stable or increasing).
3. Where either LP (Freddie Mac’s automated underwriting system) or DU (Fannie Mae’s automated underwriting system) identifies the property as in a declining market.
4. Where the lender identifies the area as a declining market (for instance, Bank of America could say, “All of Las Vegas is a declining market.”

What does that mean? Essentially two things:
1. There’s a higher risk to the loans in restricted markets because the property values are seen as potentially declining.
2. Therefore the rules and guidelines are tighter (and more expensive). More on that later.

Click here for a link to MGIC’s list of restricted markets. I’ll give you a hint, Michigan, Arizona, Nevada, Florida and California are on there – the whole state!