LATE PAYMENTS ON MORTGAGE PAYMENTS A CONCERN OF MORTGAGE INSURANCE PROVIDERS

I suppose with PMI being deductible (at least for the time being) it takes the bite out of the increased payment.  As you say, though, it won't last forever.

This whole mortgage industry thing is going to effectively shrink the pool of available buyers for all the homes on the market. I'm thinking the tightening of credit standards will probably have more effect or, at least equal effect, on prices as the foreclosure rate.  Sellers are going to have to understand that they can't get $50,000 over list in a week.  Buyers are going to need to realize they have to have a job and some money.

The days of buying a house like you bought a pair of jeans at Wal-Mart are gone. 

Personally, I think this is a good thing.  It'll lead to more stable neighborhoods with home owners that have some real connection to their home (i.e., a serious chunk of change), less stress with fly-by-night lenders trying to shoehorn people into loans they can't qualify for and Sellers who understand that, if they really want to sell their home, they need to price it to sell.

Heck, anyone who bought a home prior to 2000 is going to come out fine regardless.

Just my $.02 

I don't see the danger that exists with Hard Core Real Estate Talk, Lenn.  I only see the danger that exists when people are naive.  We all get smarter when you go hard core.

Yes, Lenn. We (lenders) have been notified for some time that mortgage insurers are refusing to offer mortgage insurance to clients based on scores and LTV's. I have asked the mortgage insurers if they are examining the borrower's credit at foreclosure to see how much consumer debt they are holding at the time of foreclosure compared to issuance of the mortgage. My suspicion is that, in most cases, we're going to find as much as a 200% increase in revolving debt and another 50% or more increase in installment debt. This is a result of runaway spending and massive accumulation of credit card and retail debt through participation in the abundant offers of cheap or free entry. Even now some furniture companies are offering no interest no payments until 2010 or longer. That cheap furniture will be destroyed by the time the first payment is due. I still get daily offers for credit cards 0% interest on balance transfers until 2009 etcetera. Now a major car manufacturer is perpetuating with a "Sign and Drive" promotion.

The government will never fix this with regulation--this is going to require some serious personal pain. Unfortunately the capitalist market is socialist in retribution. I mean if 3% of us (the total number of people in major credit trouble) dance with the Devil the rest of us are escorted from the dance floor.

During the last 6 months or so I find I'm starting to explain PMI and MIP again to buyer clients.  It had been years since that was commonplace, because of the mortgages that you described.

Frankly, I'm happy to do that.   

Lenn, I just want to clarify one point you made. PMI can be removed when the loan balance drops below 80% of the purchase price, NOT the value

Lenders can prepay mortgage insurance and then include it in the rate. This way it is deductible no matter what Congress does about PMI in the future.

Also, since mortgage insurance only accrues to the benefit of the lender, it is always going to be part of the underwriting calculus. Being able to write a riskier loan and then "insure" that loan makes sense for everybody. Insurance is based on the concept of spreading the risk over a larger field of risky situations.

The "cost" of PMI will always be a function of underwriting standards and practices.

Bill Roberts