PMI Mortgage Insurance Company Eliminates Loans Originated By Third Parties

Remember Private Mortgage Insurance (PMI)? It was insurance required by mortgage lenders on conventional loans when the borrower had a loan-to-value (LTV) greater than 80%. PMI was established to help borrowers with little cash buy or refinance houses. Then along came 2nd mortgages and home equity lines of credit. With these loans borrowers could borrow up to a combined loan-to-value (CLTV) of 100%. Terms such as 80/10/10, 80/15/5 and 80/20 became common. PMI became an afterthought.

It was thought during the boom years of secondary financing that PMI cost to much and the companies that issued PMI were making to much money for to little risk. Well, as the saying goes, "the worm turns." Now PMI companies are losing $Billions and 2nd mortgages and home equity lines are a thing of the past because of the perceived risk of the investors that used to buy these loans.

Recently one private mortgage insurance company aptly named PMI announced that it would not longer insure loans originated by third parties (brokers.) If one mortgage insurance company has done it, expect the rest to follow. According to the announcement these changes become effective February 20, 2009. PMI, the company, also announced other changes effective February 20, 2009. See PMI Eligibility and Guideline Changes.

What does this mean for homebuyers and homeowners wanting to get a loan with less than 20% equity in the property? Be sure you are working with a lender that is not brokering your loan.

Call me with any questions you have concerning the current market.