Effective June 1, the company said it will no longer insure any A-minus loans, reduced documentation loans (stated income loans, no-doc loans), Alt-A loans, investment properties, cash-out refinances, 3-4 unit properties, loans with potential negative amortization, non-warrantable condos and condotels.
Additionally, purchase transactions will require a minimum of three percent verified borrower funds.
MGIC is also updating its definition of a “restricted market” to include loans identified as such by appraisers, mortgage lenders, or automated underwriting engines, along with loans secured by properties in MGIC specified markets.
The states of Kentucky, Michigan, and New Jersey will all be deemed restricted markets under the changes, along with a slew of new Core-Based Statistical Areas throughout the country, and previously designated states like California and Florida.
Restricted markets have lower loan-to-value ratio maximums and higher Fico score requirements, as well as premium add-ons.
MGIC had previously made changes to both its underwriting guidelines and restricted markets in March to mitigate rising claims and losses after posting a net loss of $1.67 billion for all of 2007.
Shares of Milwaukee-based MGIC were down 30 cents, or 2.39%, to $12.26 in afternoon trading on Wall Street, well below their 52-week high of $67.05.