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MGIC, restricts underwriting areas effective March 3, 2008

By Eileen Landau

Real Estate Agent with BAIRD & WARNER, NAPERVILLE

February 11, 2008 12:36 AM

Here's a memo, from the Mortgage Guaranty Insurance Company,

February 6, 2008
Dear Valued Customer:
As a result of our ongoing evaluation of market conditions and loan performance, we are making a number of changes to our base underwriting guidelines and have created a new set of guidelines for areas exhibiting market weaknesses. The following underwriting guideline changes are effective for mortgage insurance applications received by MGIC on or after March 3, 2008.
(Then it goes on to break down underwriting guidelines. FICO is very important...and it better be above 660! And if the appraiser says that the property is in a declining market [see list below] , then many lenders wouldn't touch it, as these loans right now can't sell on the secondary market.)

Here is the list of restricted markets:

* Arizona -- Entire State

* California -- Entire State

* Florida -- Entire State

* Nevada -- Entire State

* Denver-Aurora, CO

* Greeley, CO

* Washington-Arlington-Alexandria, DC-VA-MD-WV

* Atlanta-Sandy Springs-Marietta. GA

* Honolulu, HI

* Coeur d'Alene, ID

* Chicago-Naperville-Joliet, IL

* Baltimore-Towson, MD

* Bethesda-Frederick-Gaithersburg, MD

* Hagerstown-Martinsburg, MD-WV

* Barnstable Town, MA

* Boston-Quincy, MA

* Worcester, MA

* Detroit-Livonia-Dearborn, MI

* Minneapolis-St. Paul-Bloomington, MN-WI

* Atlantic City-Hammonton, NJ

* Edison-New Brunswick, NJ

* Newark-Union, NJ

* Ocean City, NJ

* Nassau-Suffolk, NY

* New York-White Plains-Wayne, NY-NJ

* Poughkeepsie-Newburgh-Middletown, NY

* Portland-Vancouver-Beaverton, OR-WA

* Virginia Beach-Norfolk-Newport News, VA-NC

* Winchester, VA

* Tacoma, WA

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Lisa Spalding

Casa Latino Four Corners, REALTOR, CDPE - Longwood, FL

REALTOR, CDPE

Yep, Eileen--my area is smack, dab in the middle of Florida, a "declining market." Buyers typically need at least 5% down for a conventional loan here, now. Plus, if they are buying a condo, they need at least 10% down payment. That puts some people out of the market to buy but I think tightening up on guidelines is the only way to go so that people who are buying can actually PAY back the loan. :)

Thanks for the above info. Very helpful.

Feb 11, 2008 12:42 AM

Natalie Langford

Realty Negotiations - Winchester, VA

Winchester, VA Real Estate

Oh, how painful it is to have my city on this list...I'm glad you shared. The more insight we can have, the better...

Feb 11, 2008 12:51 AM

Kirk Williams

Private Venture Capital - Everett, WA

This is not the first declining market scenario I have experienced and although the quote above and the revised credit score level for some programs seems ominous it is not as bad as it seems because before the "exotic" loans popped up the lending standards were similar as they will resemble now.

Even though credit score puckering has occurred in the conventional side the debt to income is still fairly liberal plus if the housing market you deal with is in the FHA range that is another avenue to offset credit score issues.

Most of the population is above these minimum credit scores the problem as you look back and look forward has been down payment and cash to close. That is more of the problem than anything else from my perspective.

Feb 11, 2008 12:52 AM

Don Lantier

Donald J Lantier Realty - Smyrna, GA

Broker/Owner of LantierRealty.com & HouseTour4

really appreciate this information....I think we all knew this was coming

Feb 11, 2008 01:49 AM

Eileen Landau

BAIRD & WARNER, NAPERVILLE - Naperville, IL

ABR, CRS, e-PRO

Lisa,

I work with many relocating buyers. And, most of them, especially from California, Florida and Michigan, can't get their homes sold!

We need higher limits for FHA put in place and not just a temporary fix.

Natalie,

You'd be surprized how many agents don't want to hear, see or read the reality of the market. I had blogged several months ago about the nationwide slowing...and one agent basically said that I didn't know what I was talking about. I wonder if his area is in the above list. Mine is!

Kirk,

I've lived thru too many down cycles...it's normal, but this particular down market will be worse than most. Too many fraudulent loans given to people who couldn't/can't afford the payments. It will take longer to sell off all the inventory.

Don,

Yes...MGIC doesn't have the reserves to pay for their older defaulting loans. They're going out and trying to get venture capitalist, large brokerage house to help them.

These restrictions should have been put into place months ago.

Feb 12, 2008 08:35 AM

MGIC, restricts underwriting areas effective March 3, 2008

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Eileen Landau

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