Private Mortgage Insurers Appear Unwilling to Follow the Leaders

Submitted by Ronald Tennant with Metrocities Mortgage:

Chicago Daily Herald (05/23/08); Harney, Ken
Fannie Mae and Freddie Mac both have eliminated policies requiring mortgage borrowers in declining markets to boost their down payments by 5 percent in response to claims from the National Association of Realtors and other groups that the practice held down home values and sales and did not take into account submarkets where prices are holding up. Fannie Mae will permit minimum down payments of 3 percent for all borrowers whose loans are underwritten with its automated software and 5 percent for those whose loans are manually underwritten, noting that upgrades in its automated underwriting system have improved loan assessments and made it possible for the declining markets policy to be scrapped. Observers hope private mortgage insurers will follow in the footsteps of the government-sponsored enterprises by getting rid of policies that single out certain markets or ZIP codes; but MGIC, for one, has no plans to alter its policies. The nation's biggest private mortgage insurer has broadened its list of distressed markets, turned away from cash-out refinancings and mortgages on investment properties and will stop insuring condominiums in Florida as of July 1. Experts believe more borrowers will resort to FHA loans to take advantage of the 3-percent minimum down payment if private mortgage insurers do not change their policies.