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Private Mortgage Insurers Tighten the Screws


Private mortgage insurers announced severe restrictions this week in light of the ongoing mortgage crisis.

MGIC unveiled a number of sweeping underwriting changes, including a ban on second homes, manufactured homes, and cash-out refinances.

The company also lowered its maximum debt-to-income ratio to 38 percent from a prior 45 percent, and will require two months reserves on all transactions.

Additionally, MGIC will require lenders to provide Third-Party Originator identifiers when applying for mortgage insurance on a third-party originated loan.

Those changes are effective on MI applications received on or after March 9.

Meanwhile, PMI Group has said effective February 20, third party originations (mortgage broker originated loans) will be ineligible for private mortgage insurance.

Manufactured housing, construction-to-perm loans, two-unit properties, interest-only loans, and nontraditional credit will also be ineligible.

A minimum credit score of 680 will be required on all products and programs, and a maximum DTI of 41 percent will be permitted.

PMI will also no longer accept reduced appraisal forms, such as exterior-only or drive-by inspections.

The company has added roughly 50 metros to its distressed markets list, along with the entire states of Hawaii and Rhode Island.

Private mortgage insurance is required for single loans with a loan-to-value ratio greater than 80 percent.

In December, private mortgage insurance defaults topped 100,000 as application volume plummeted amid restrictive underwriting guidelines.

One former player, Triad Guaranty, was forced to stop writing new insurance last year thanks to record losses tied to rising defaults.

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