Republic Mortgage Insurance Company released in their notes yesterday, that they will not insure any loan with a greater than a 97% loan to value/ combined loan to value ratios (LTV/CLTV) regardless of any automated underwriting decisions.
Also any declining markets they are going to add a 5% margin so they will only insure loans in declining markets that have a 92% LTV/CLTV.
Usually when one player makes an announcement like that the rest follow suit. So you can expect this to be the new standard across the board.
Essentially there are no more 100% loans. So if a buyer does not have three percent of their own money then the only other option is a Down Payment Assistant (DPA) Program and an FHA loan. This will not put pressure on the prices but it will have an affect on the bottom line to the seller.
The way the DPA programs work is the seller agrees to "Gift" 3% plus a small administrative fee to a Non-Profit organization and then the Non-Profit organization turns around and gifts the money to the buyer at closing. Some of these organizations are AmeriDream and Nehemiah Corporation.
Our current market condition has sellers willing to pay 2-3% concessions for the buyer's loan closing cost. Now combine that with the DPA cost, prices won't really go down but it will come from the seller's bottom line. This could play out pretty good for the buyer that has their own money and will give some leverage to sellers in certain situations.
It seems like every time something happens in the lending world it gives another reason to use FHA.
FHA Loan limits are up to $729,750 in Salt Lake County which is just over 90% of the homes in Salt Lake County Listings of the WFR MLS.