Friday, March 21, 2008

PMI Guideline Changes

Changes just keep coming. These changes are coming in "alignment with the Economic Stimulus Act of 2008." Though the opening letter paints a bright picture of these changes, they are actually making adjustments and tightening their standards. These changes are going into place on April 15, 2008.

Here is the link to read the full letter and information regarding these changes:

Here is a summary of the changes...

  • LTV and FICO "requirements are effective regardless of any AUS decisions or recommendations."


  • --Cash out Refinance loans are no longer eligible

  • --Investment properties are no longer eligible

  • --Limited Documentation loans are no longer eligible

  • --Interest Only loans are no longer eligible on Investment Properties

  • --Owner Occupied/Primary Residence I/O, then borrowers must qualify using full PITI (Principal, Interest, Taxes, Insurance)

Besides the above major points, PMI also developed a matrix to better explain its requirements. A couple of examples:

  • One unit SFD (basic single family detached home) - Max LTV 90% with min fico score of 680.

  • Jumbo Loans on Full Doc PMI up to 85% LTV with min fico score of 700.

Other than the above, finding PMI for certain types of loans and borrowers is going to become increasingly difficult. The best new option is FHA loans as long as they remain under the $346,250 limit threshold.

There is no telling how far and fast the guidelines can change from these most recent changes. The goal is to stay encouraging to our borrowers and buyers of homes and consult them from the beginning of the process on how to improve their credit and save money in order to buy their first or second home. In addition, a mindset change must take place regarding the largest purchase the average American will ever make, a home. It has seemed as though it was a fleeting decision made by buyers who were not educated properly. This has left a path of destruction in its wake and made it difficult for those who would be qualified and responsible buyers to even secure a loan. A process where we work for the things in life we want and desire to have must begin to unfold. This will keep us away from the past few years when Americans over-extended themselves hoping to "cash-in" on values and have found themselves without a strong and secure financial background to rely on.

Let's make a decision as realtors and loan officers to educate our buyers and take care of them in their dream of home ownership, not using it as a way to cash in on their lack of understanding of the industry we enjoy so much.

I hope your week is going well and it finishes off as strong as it began.

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