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.

Another Example of Why It’s Going to Get Harder to Get a Mortgage

A couple of points to make about this article:

• The PMI companies are experiencing continued and increasing losses on their existing “book of business.”
• The portion of their “pipeline” that was previously thought to be low risk is seeing greater and greater losses.
• That is lowering their credit risk ratings.

So what does that mean for the housing market?

• The financial markets are expecting additional and increasing losses from the mortgage market.
• As we see losses increasing, we’re going to see greater pressure to avoid the type of loans that are causing the losses.
• Until we start seeing a “group” of loans that have been done under the more recent “restrictive” guidelines that actually perform better than expected, we’re going to see added pressure to tighten restrictions on PMI deals.

The long and short of it is this:  Until we see a turn around in the jobs market and the housing market, we’re going to continue heading down a path where the only people who are going to be able to do less than 20% down on conventional loans are people with very high credit scores, very low debt ratios and pretty hefty cash reserves.

That’s my opinion, but it’s another sign of the direction things are going in the mortgage world.

Tom Vanderwell

S&P Downgrades Five Mortgage Insurers : HousingWire || financial news for the mortgage market

Standard & Poor’s downgrade the credit ratings on five mortgage insurance companies. The credit ratings agency said continued losses on insurance claims exceeded previous expectations, as low-risk books of business are starting to experience greater losses.

“The lower-risk books of business within the mortgage sector (such as those with higher FICO scores or lower loan-to-value ratios) have been and will be more adversely affected than we had anticipated and U.S. mortgage insurers’ losses will continue to be greater than previously expected overall,” S&P analyst Ron Joas wrote.

The ratings agency assigned a negative outlook on the sector based on the potential for additional increased losses.

“If the US economy were to experience another setback, prolonging the exit from the recession, delinquencies and resulting losses could increase at an even greater rate, with lower benefits available from rescissions than what has been seen over the past year,” Joas wrote.

He added, “In addition, any existing and potential benefits from modification programs might reverse, and modification attempts might be ineffectual.”

The mortgage insurers downgraded are:
Genworth (GNW: 11.90 +1.02%): From triple-B plus to triple-B minus
PMI Group (PMI: 2.67 +11.72%): from double-B minus to B plus
Radian Group (RDN: 7.55 +6.34%): from double-B minus to B plus
Republic Mortgage Insurance Co.: From A minus to triple-B minus
United Guaranty : From triple-B plus to triple-B

Technorati Tags: Mortgage Insurance, PMI, Mortgages

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

Mortgage Insurers Face Tough 2009, Fitch Says

U.S. mortgage insurers face a rough road ahead, according to a report published Tuesday by Fitch Ratings, which said it expects insurers to face a negative outlook over the intermediate term.

Mortgage Insurers Face Tough 2009, Fitch Says : HousingWire || financial news for the mortgage market.

Paul Jackson has the story (he’s really on top of things….)

A couple of quick thoughts, then I’d recommend that you read Paul’s article:

1. Fitch says the Intermediate Term – that means we aren’t close to done with things.

2. Falling House Values are going to continue to play a big role in the overall economy.

More later,

Tom Vanderwell