MGIC is tightening some of its underwriting requirements, loosening others and dumping its current pricing model for risk-based premiums.
Interest-only and graduated-payment mortgages are will no longer be eligible for mortgage insurance, according to MGIC Bulletin #01-2010. In addition, the maximum amortization period has been limited to 30 years.
The valid credit score requirement has been changed to a minimum of three tradelines evaluated for 12 months, the mortgage insurance company said. Nontraditional credit guidelines are required for loans without valid credit scores.
On owner-occupied purchases of one-unit properties in non-restricted markets, the minimum FICO score has been reduced to 660 with loan-to-values up to 95 percent. The maximum debt-to-income ratio on transactions with FICOs of at least 740 is now 45 percent. The changes are available only for retail originations.
Also on owner-occupied properties in non-restricted markets, purchase-money second mortgages can be paid off in rate-term refinance transactions with up to 90 percent LTV. The minimum FICO score is 720, and any home-equity lines-of-credit being paid must have solely been used for the purchase of the property.
The mortgage insurer changed the status of 27 markets from tier-one restricted to non-restricted. At the same time, six restricted markets were moved from tier one to tier two. Most of the impacted markets were in the eastern half of the country.
The less restrictive underwriting changes take effect on March 8, while more restrictive changes will need to be implemented on applications received on or after March 22.
MGIC’s current premium plan is being replaced with a new plan that factors in credit scores. Borrowers will be categorized as class one, with FICO scores of at least 720; class two, with scores ranging between 680 and 719; and class three, with credit scores of at least 660.
“Given today’s high-quality lending environment, we expect that most borrowers will benefit by receiving lower premium rates,” the bulletin said.
The following table from MGIC outlines sample premiums under the three classes.
The Milwaukee-based company, which claims to be the “leading” U.S. provider of private mortgage insurance, said the new premiums go into effect on May 1, subject to regulatory approval. For customers that find the new premium structure difficult, MGIC said they can continue using the existing structure — though they need to contact their account manager by April 16.
