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Mortgage

MI companies creating new standard for over 45% DTI mortgages

More companies prepare to raise standards

More mortgage insurance companies continue to fight against mortgages with debt-to-income ratios of 45% to 50% as they prepare to raise their standards.

Last year, the GSEs announced they were increasing their debt-to-income ratio to 50%, a move that mortgage insurance companies are starting to fight back against.

But some MI companies are beginning to fight back. Last week, HousingWire outlined plans from MGIC and Genworth to increase their standards on high DTI loans, but as it turns out, that was just the tip of the iceberg. Many other MI companies announced they also plan on raising their standards this month.

In June last year, Fannie Mae announced it was preparing to raise the debt-to-income ratio, the No. 1 reason that mortgage applicants get rejected. It announced it would be raising its DTI ceiling from 45% to 50% as of July 29, 2017. However, qualified mortgages still need a DTI of 43%.

DTI is a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, versus their total income.

Mortgage insurance company Essent announced that, given the recent increase in loans with DTIs higher than 45%, and additional layers of credit risk within this segment, it will no longer insure mortgages with a DTI higher than 45% and a credit score lower than 700.

This change is set to take place for any applications received on or after March 12, 2018, and the company will continue to monitor the segment to evaluate the need for any additional changes.

Radian also made several changes for its requirements for mortgages with DTIs exceeding 45%. The company will no longer insure loans with a DTI higher than 45% if the credit score is below 700. It is also restricting mortgages with DTIs above 45% and loan-to-values of more than 95%.

These changes only apply to single premium loans, including applications with an automated underwriting system response of approve or accept, eligible or ineligible, the company stated in its announcement. Radian will continue to insure all other applications that meet its published guidelines.

Radians changes go into effect for MI applications received on or after March 19, 2018.

National MI announced all MI commitments submitted on or after March 24, 2018 will have increased standards for mortgage with DTIs higher than 45%.

Similar to other MI companies, National MI announce that for AUS eligible loans with a DTI more than 45%, borrowers must have a FICO score of at least 700.

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