Mortgage Insurers Increase Requirements
So far, we’ve been hearing a lot about how mortgage lenders are increasing their requirements for new home loans, and even for home equity loans. But one group has remained somewhat in the background. But now mortgage insurers are making the news as they continue to add real estate markets to their “watch lists.” Enterprise News reports on mortgage insurers:
The expanding lists reflect concerns among mortgage insurers, who help compensate lenders if a property is foreclosed, that many buyers were not setting aside a big enough down payment before they bought their homes.
What is private mortgage insurance?
The mortgage insurers in question are restricting private mortgage insurance (PMI). PMI is insurance that many mortgage lenders require for home buyers that put down less than 20 percent for a down payment. If the mortgage goes into default, then the insurance compensates the mortgage lenders for the loss.
Prior to the subprime lending crash, mortgage insurers were willing to insure mortgage with no down payments. Now, though, in certain real estate markets that have been especially hard hit, mortgage insurers are changing their requirements. The are requiring five or ten percent down in order to underwrite some policies.
Continuing difficulties for home buyers
This, of course, puts more of a burden on home buyers — especially first time home buyers — in certain real estate markets. It means that they have to come up with a larger down payment in many cases, and this can be difficult. Even those with good credit may find it difficult to get approved for a home mortgage loan without a substantial down payment.
On the other hand, perhaps this is what the economy needs in the long run. It it requires more effort to get a home mortgage loan, individuals may return to the “old-fashioned” principles of money management when it comes to preparing to buy a home. And it might ensure that those that do buy homes are less likely to default.
Tags: mortgage loan blog, mortgage insurers, home mortgage loan, mortgage lenders,
private mortgage insurance, first time home buyers, PMI
April 17th, 2008 at 7:59 pm
[…] however, something else is coming to light. Mortgage insurers are starting to require a bit more as […]