Marc's Mortgage Matter's

Seen on a bumper sticker: “CHANGE....... it's all we're gonna have left!”

Private mortgage insurance, known to many as P.M.I., is a necessary evil for borrowers who cannot afford the 20 percent down payment often required by lenders. But now, with losses mounting within the mortgage-insurance industry, some applicants are being turned away, while others will have to pay higher premiums.

Meanwhile, the Mortgage Guaranty Insurance Corporation of Milwaukee said that it would no longer insure cash-out refinance mortgages and mortgages for second homes or manufactured homes.

The company also placed restrictions on broker-originated mortgages, limiting insurance only to those loans where the borrowers make at least a 10 percent down payment and have a credit score of at least 720.

The Mortgage Guaranty Insurance Corporation declined to comment on the new policies. But Thomas Taggart, a spokesman for the PMI Group, said the changes within his company reflected those occurring throughout the industry. “A lot of different mortgage-insurance companies are putting restrictions on different segments,” he said.

“We’re still writing new business,” Mr. Taggart added. “We just have to be prudent about how we manage that.” Because the recent changes are not consistent from one company to the next, borrowers in need of P.M.I. are unlikely to be shut out completely.

In the most areas though, borrowers can still seek government-insured loans like FHA financing. But they may not always be a good fit. Borrowers face income restrictions, and the maximum loan amount is $625,500 in the New York City and Northern New Jersey area, and $511,750 in Fairfield County, Conn. That is a considerable jump from 2007, when the limit was $363,000, but still not enough to buy a home in many neighborhoods. In a few weeks that limit will supposedly rise to $729,000 which is good news.

Mortgage experts say that there are some conditions under which lenders will offer mortgages to those with less than a 20 percent down payment or equity in a home. In those instances, a borrower will not only need to have excellent credit and adequate income but be in an area with stable housing prices.

Housing market conditions, however, have been less than stable in most regions, and the rise in mortgage default rates has been largely responsible for pushing up P.M.I. premiums.

Last year, Genworth Financial’s domestic mortgage-insurance business announced a 20 percent rate increase. Pending approval from the state insurance department, a New York homeowner with a $200,000 mortgage would pay about $17 more per month on a typical loan, or a total of $103.33. (The average P.M.I. rates are about 0.6 percent of the loan amount on a basic loan with 10 percent down.)

But increases would apply only to new loans, because mortgage insurance companies evaluate a borrower’s default risk only once — at the time of an application. Some analysts, though, expressed concern about new borrowers.

“If mortgage insurers run out of capacity to write new business,” said Howard Glaser, a principal of the Glaser Group, a mortgage consulting firm in Washington, “the last avenue for purchasing a home with less than a 20 percent down payment will be closed off for a lot of people.”

Note: Lately with many having a difficult time putting down 20% we have approved many more FHA loan then in the past. Feel free to discuss the options if you fall into the category of having only X amount of funds to work with.