Radian Guaranty Inc. is the latest private mortgage insurer to tighten underwriting standards, with a moratorium on loans with down payments of less than 3 percent kicking in March 31, and a ban on stated-income and stated-asset loans scheduled to begin April 30.Like competitors including PMI and MGIC, Radian has also adopted more stringent standards in declining markets where prices are perceived to be falling.
Beginning March 31, Radian said maximum loan-to-value ratios will be increased to 97 percent nationwide. For full-documentation nonconforming loans, a minimum FICO score of 680 will be required to obtain mortgage insurance when loan-to-value ratios fall between 95 percent and 97 percent. Radian will no longer insure negatively amortizing loans after that date, the company said in a March 7 bulletin.
Radian will continue to insure subprime loans, but borrowers must have FICO scores of 660 or better, and minimum 5 percent down-payment requirements instituted Feb. 1 remain in force. Radian will not insure subprime loans on second homes, three- to four-unit properties, or on interest-only or cash-out refinance loans.
Beginning April 30, Radian will no longer insure any limited-documentation "alt-A" loans, including stated-income or state-asset loans.
"While certain forms of alternative documentation used to verify assets and income are appropriate with a disciplined underwriting process, the stated programs will no longer be insurable," the company said in a bulletin issued Thursday.
In Thursday's bulletin, Radian said it will also raise the maximum loan-to-value ratio for condominiums or co-ops in declining markets to 90 percent at the end of April. Radian has required minimum down payments of 5 percent in those markets since Feb. 1. The company has published a 138-page list of declining markets by ZIP code on its Web site. (And, Hallelujah, the Denver Metro Area is NOT on that list!)
Mortgage insurance company PMI has stopped insuring loans with down payments of less than 3 percent, and increased down-payment requirements in distressed markets to 10 percent. PMI will no longer insure pay-option adjustable-rate mortgage (ARM) loans in distressed markets, and requires 15 percent down payments on limited-documentation loans.
MCIG has stopped insuring loans with down payments of less than 5 percent in 30 declining markets, including all of California, Florida, Arizona and Nevada, and requires at least 10 percent down on loans in those markets when borrowers' FICO scores fall below 680. MGIC will no longer insure reduced-documentation alt-A loans, cash-out refinances or loans on investment properties in those markets.
What does is it all mean? The days of financing homes with "easy money" are gone, at least for now. But if you are replacing homeowners who couldn't afford their mortgages with much more tightly screened, qualified buyers, aren't you stabilizing the housing market? Wouldn't now be a great time to buy, since the causes which led to the fire sales and outstanding values of today are being addressed and weeded out of the marketplace?
The value of a qualified buyer has gone up - significantly. That's why we need to take GREAT care of our clients. There's no excuse for anything less.
