MGIC changes underwriting guidelines in response to market conditions
Mortgage Guaranty Insurance Corp., the nation's leading private mortgage insurer, is loosening its underwriting guidelines in a series of changes effective either Dec. 1, 2010 or Jan. 1, 2011. The company said it regularly changes its guidelines to accommodate and reflect current market conditions. Starting Dec. 1, MGIC will insure mortgages with a debt-to-income ratio up to 45% if the borrower has a credit score equal to or greater then 740. The loan must also be either a fixed-rate product or minimum 5-year adjustable-rate. MGIC will also consider underwriting loans for "flipped" properties — a property acquired by a seller less than 90 days before the purchase contract. However, the firm said a full-file MGIC underwrite is required on any property acquired by a seller less than 180 days before the purchase contract closing date. The minimum credit score for Tier Two jumbo loans (more than $417,000) will be 720 as of Dec. 1, down from 760. Also beginning in December, MGIC said sellers can submit properties with "subject to completion" appraisals for purchase as long as 90% of the prospective plans are completed. This comes with a 120-day commitment period for all plans to be finished. A second certification of property value and borrower income on these properties is not required if the seller meets the 120-day deadline. Beginning Jan. 1, 2011, the qualifying rate for all option ARMs less than five years will be a borrower's fully-indexed accrual-rate plus 2%. The maximum debt-to-income ratio for this type of loan will be 41%. On Nov. 1, MGIC changed its underwriting policy to insure loans with a 97% loan-to-value ratio for all existing homeowners. However, the company said two weeks ago, MGIC's servicing sector will not insure the portion of a loan principal written off by a servicer. "MGIC is released of its obligation to the same extent and, therefore, does not cover the portion of the released balance if the borrower re-defaults," MGIC said in a company e-mail. This does not include bankruptcy cases. Write to Christine Ricciardi.