Is YOUR Market Area on the List?

Several Mortgage Insurance Providers, including AIG United Guarantee, are toughening their MI Underwriting Rules in areas which it considers "Declining."  In these zip codes, it will be tougher for those with low down payments on their new homes, or low equity in existing homes they wish to re-fi, to get new financing.  More stringent rules apply to those seeking certain adjustable rate loans, or purchasers on non-owner-occupied investment properties.

See the entire AIG Declining Markets list here. 

Those with FICO Credit Scores under 620 will have difficulty getting Mortgage Insurance at all.  If you have a FICO between 620 and 680, or if one of your co-signers on the loan has what MI considers "non-traditional credit," you'll need at least 5 percent down.    AIG's latest Underwriting Guidelines, updated March 10th, provide further technical details.

Entire Metro Markets appear on the "Declining" list - Phoenix AZ, Las Vegas NV, as well as many large zip codes in California, Florida, Ohio, and Michigan.  Fortunately, zips in the Chicago area do not appear on the list, for now - but MI standards remain tough here for low down payment borrowers.

The Spring Real Estate Market, traditionally robust across the country, has been dampened in 2008 by universally tougher mortgage underwriting standards, as well as the decline of sub-prime mortgages, sought by those with challenged credit.  Here in Chicago, inventories of for-sale properties remain high - over three years in some areas - as fewer qualified borrowers have their choice from a vast number of available properties.

Where sub-prime has disappeared, many have turned to FHA loans, with easier down payment and underwriting requirements - and no Declining Market list.  In some states and major cities - including loans underwritten through the City of Chicago and the Illinois Housing Development Authority - additional programs exist for many lower-income and first-time home buyers.

Larger mortgage lenders are separately increasing their down payment requirements in what they consider to be "declining markets."   Wells Fargo now requires a minimum 25% down in areas they consider "declining." 

Relative to re-financing,  some lenders, including National City Bank, are refusing to subordinate their smaller second mortgages.  They fear these smaller loans may not be repaid should the homeowners default on their primary home loan.

The conventional loan threshold for Fannie Mae and Freddie Mac loans will increase in some market areas, as a result of President Bush's Economic Stimulus Package.   This could provide relief in certain metro areas (but not the Chicago area).  Many experts agree, however, that the home loan market will continue to be tight for a while, reducing chances for a fast housing market recovery.

Take a look at our post yesterday evening via BlogChicagoHomes.com for more details, including a link to an article in yesterday's Chicago Tribune by reporters Alan Zible and J.W. Elphinstone.

DEAN & DEAN'S TEAM CHICAGO