Blog of the Mortgage

I've spent a lot of time in this space elaborating on MI changes and FNMA changes that were coming. All of these documents are available for review on my Education Station on the left.

These two changes are coming in Tandem on June 1^st. Two of the largest MI companies about (MGIC/PMI) are making significant changes to their eligibility requirements, these will go hand in hand with the Updated FNMA 7.0 release of DU.

I'll start with FNMA and it's updated 7.0 release of DU.

If you're not aware release 5.7 (the version we all use currently) has been in action since August, 2006.

What's going to change with 7.0? (this will be the abbreviated version)

Back to the Expanded Approval Bullet: this is a deceptive point: It says that more loans will be eligible for EA findings (sounds good right? - wrong).

Digging deeper we find that for the following products more loans that would likely have been normally approved/eligible we're going to get EA findings instead.

So what's going to get "more eligibility"?:

1. 30 yr with 10 yr IO
2. 5/1 IO arms with 2/2/5 Caps (most arms are like this)
3. 3-4 unit properties
4. cash-out on 2-unit, 2^nd homes & Investors
5. Investors over 80%

All of this is not the end of the world, truly, it is not. However, you add to this the LLPA's (Loan Level Price Adjusters) already present on all of our ratesheets and you've got one doozy of layered risk & cost associated with these various loans.

Now, MGIC & PMI have published separate releases, both of which are complimentary (not in a good way) to 7.0. at the end of the day you're going to be limited for any loan that exceeds 80% LTV.

MGIC Ineligible List:

1. Expanded Criteria (EA- see how pushing more loans into this bucket isn't good)?
2. Investors
3. Cash-Out

MGIC has updated their Restricted/Adverse/Declining List to include more counties

1. Minimum FICO 680 for 90% LTV on O/O, 2^ND Homes
2. MI has an .10 add-on for Restricted/Adverse markets

PMI Ineligible List:

1. Investors,
2. 2^nd Home & Investor Cash-out
3. Limited Doc loans

PMI has updated their Restricted/Adverse/Declining List to include more counties

So, FNMA is pushing more loans into buckets that can't get MI which and the MI companies are not insuring those loans anymore. This means that at over 80% it gets very, very difficult to get loans done. Also many of us don't even have EA on our ratesheets. As you've noticed many of us are already honoring these new MI policies but the rest will come around by June 1^st for sure.

Being the lender of last resort on these types of loans carries unfortunate and ominous consequences.

So, if you've not yet considered FHA this might be the time to review this fantastic option. My Team and I are winning rave reviews from our clients. We will look forward to working with you on your loans in the near future.