San Diego’s private mortgage insurance dilema
February 27th, 2009 Categories: Real Estate News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– Yesterday I received this email from a lender I use;
There is only 1 MI company left that does CONDOS to 90%…….
41% max DTI regardless of DU findings (edit:DTI=Debt to income)
70% owner occupancy (yikes)
Min credit score: 720(this has been for a bit)
The dilemma is that while there are so many positive things happening for home buyers right now such as low mortgage rates and the new tax credit, it does no good if you can not qualify for a loan.
One of the perks of the current climate for both buyers and sellers, is needing as little as 3.5% down for an FHA loan. But without a company that will write private mortgage insurance on your loan, which is often necessary on purchases with less than 20% down, this ability to purchase with a low down is essentially unavailable to you if you are buying an attached home.
Another aspect of these new guidelines that could have significant impact on our region is the 70% owner occupancy rate. In the past it has been 51%, so this is quite a jump. One of the issues that was coming up quite a bit locally was project that did not meet the 51% guideline due to REO/bank owned homes. The FHA and FNMA announced that they consider these homes owner occupied for the sake of ratios, however it is my understanding that lenders and private mortgage insurance do not have to abide by this. They can still use their own guidelines.
The significance to our region is that close to half of resale homes sold are either bank owned or short sales. So this is not a small portion of our local market.
Now the email says there is only one left. If that one stop writing policies, it will be impossible to purchase a condo for less than 20% and that does not play well in our area!!
Now, if your thinking the government would not let this happen, there is so much confusion with this industry that it is a possibility.
Check out this headline from smartbrief.com on 2/23/2009;
Mortgage insurance changes part of rescue program
The article goes on to say that, “Mortgage insurance protecting Fannie Mae and Freddie Mac from homeowners’ default will be included as part of the mortgage rescue plan, James Lockhart, director of the Federal Housing Finance Agency, assured the Mortgage Insurance Corp. of America.”
However, just this morning, uk.reuters.com had this;
U.S. has no plans to aid mortgage insurers: official
In this article the treasury department said it has, “no current plans to provide funds under the financial stability plan to mortgage insurance 
companies,” the official said.”
AND James Lockhart is now saying, “he would like to see mortgage insurance companies receive a capital injection under Washington’s financial market rescue plan.”
That’s a bit different than assuring the industry will be included.
So what does this mean to you? It means that if you are not getting straight and direct answers from your lender or your realtor, it is more a reflection on the environment than on their ability. Hopefully. I have heard from top to bottom that this is a market no one is familiar with and the rules are changing sometimes hourly.
If you are looking to buy an attached home, make sure you inform your lender about your down payment and ask about the PMI situation. I will gladly help you with any questions or concerns you may have.
“This is now a great opportunity to buy or refinance,” said Satnick, 44. “But getting the mortgage has gotten so hard it’s putting those properties out of reach of a lot of people.” -Robert Satnick,www.bloomberg.com, 2/27/2009
Use someone you trust.
