Appraisal Institute Reports Mortgage Insurers Starting To Loosen Downpayment Requirements
This article from the Appraisal Institute is really quite significant, since for the past year it has been almost impossible to obtain low down payment mortgages unless you went to the FHA. The mortgage insurers (those that have not gone bankrupt), are seeing a loss in revenue due to the rise of FHA financing which now is over 40% of all lending in the US. It is no surprise that they want a piece of the pie, and thus we have competition! This can only be good for borrowers, by offering more choices, as well as forcing open the coffers of money that the housing market needs to move forward again.
Loosening of Down-Payment Standards Shows Market Confidence
As housing markets across the country begin to show signs of stabilization, some mortgage insurers and lenders are beginning to ease down-payment requirements, according to a Dec. 19 report in The Wall Street Journal.
In some parts of the country, borrowers with a credit score of 680 or higher – down from the previous minimum score of 700 – can now finance up to 95 percent of a home’s value. “We are feeling better about the economic condition of the marketplace,” Michael Zimmerman, senior vice president of investor relations at mortgage insurer MGIC Insurance Corp., told the Journal.
However, credit remains tight in some markets because of concerns about additional home-price declines. Mortgage companies are continuing to scrutinize appraisals in certain markets. For example, Genworth Financial Inc.’s restricted list now consists only of the states hit hard by the housing crisis, including Arizona, California, Florida, Michigan and Nevada.
Moreover, although there are indications that the worst is over, many lenders and mortgage insurers either are continuing to maintain high credit standards or are increasing standards in the wake of high unemployment levels. Fannie Mae increased its minimum credit score in December from 580 to 620.
Meanwhile, after losing a 60 percent share of the market during the first nine months of 2009 compared to a year ago because of strict lending standards, mortgage insurers are seeking to regain its competitive edge against the Federal Housing Administration. “To have any presence in the mortgage market, the mortgage insurers have to be more flexible,” Guy Cecala, editor of Inside Mortgage Finance, told the Journal.
Due to the very stiff competition in the real estate market, some owners levelled down with their requirements and even for the downpayment. I am pretty sure that if the demand for the housing business is high, the rules will change again.