Lenders V. Mortgage Insurance

One of these days, the real estate lending industry will be on the same page with their friends in supporting industries. However, until the lenders are on the same page with the mortgage insurance company's, the real estate environment is going to stay a bit confused. Here's what's happening...

On one side of the coin, Fannie Mae (Fannie Mae and Freddie Mac buy the majority of all conventional loans funded in the US) says they have set up a national down payment program. Meaning, they don't care where the home is, they have programs available with 97% or 95% financing, 3% and 5% down payments or more of course. Even if the home is in a "declining market" where property values have been determined to be dropping for a period of time. For a while, FNMA was requiring increased down payment requirements in these declining markets.

Good news for all... low down payment conventional programs are available across the US. Not so fast. The mortgage insurance companies, which insure these low down payment loans, are not lending in declining market areas or are requiring larger down payments themselves. So, although the programs are available, the programs are not insurable so a buyer in those markets can't get the low down payment program.

And don't just blame the MI companies. FNMA was in on this for a while too. The MI companies have to put the stops on poor lending practices and have to start to make some money as they have been losing billions of dollars over the past few quarters.

For the time being, FHA is one of the best options available for low down payment loans, as FHA does lend with their standard 2.25% down payment program across the USA. And FHA is growing into a BIG role in the lending industry and will remain a strong factor for years to come. A big reversal for FHA which has had declining market share for years due to the aggressive low and no down payment programs available to just about anyone, no matter the credit risk.

Mortgage news as reported by Ken Pederson, Certified Mortgage Planner, CMPS at FAIRWAY Independent Mortgage Corp. in Lancaster, PA.