Mortgage Insurance Guidelines Easing Up

February 21, 2012 by · Leave a Comment 

A few years back, mortgage insurance guidelines got so strict that it became common for a loan officer to obtain a mortgage approval from an investor and then run into a Private Mortgage Insurance (PMI) approval problem. The main reason for this is that the PMI guidelines had become stricter than the investor guidelines. Well, good news to report on this front as not only are the PMI guidelines easing up a bit, but a new trend has emerged where PMI companies are once again automatically approving a loan if the lender obtains an approval through either Fannie Mae’s DU or Freddie Mac’s LP automated underwriting system. This is a wonderful development that will be of great benefit to realtors, lenders, and borrowers alike. When a borrower submits an application for a Conventional loan, he will once again be seeking just one approval, rather than two. This is another sign that things are headed in the right direction…..

Mortgage Insurance Tax Break Gone

January 17, 2012 by · Leave a Comment 

 

 

On Dec 31st, Congress let 58 tax code benefits expire, including credits for home energy improvements, credits for builders of energy-efficient new houses, and home buyer tax deductions for mortgage insurance.  The mortgage insurance deduction has been a key mortgage financing benefit in place since 2007 which benefitted home buyers with income of $110k per year or less.  Combined with the new fees they are imposing on Conventional loans this Spring, Congress continues to increase the costs of homeownership rather than reduce them!  It should be noted that Congress still has the power to reauthorize all or some of the write-offs retroactively this year, but the current political atmosphere raises doubts about that happening.  Its time to let our elected representatives know how we feel!

 

Eliminating Mortgage Insurance

March 18, 2011 by · Leave a Comment 

For loans originated after July 1999, there are two methods to eliminate mortgage insurance (MI).  The first is that a lender is required by law to automatically eliminate MI when the loan balance drops to 78% of the original sales price of the home (this does not include up-front MI on an FHA loan which is never recoverable).  For FHA loans only, there is also a rule that the homeowner has to wait at least five years before cancelling the MI (this rule does not apply if original amortization term of loan is 15 years or less).

The second method allows the homeowner to utilize appreciation by having a current appraisal done.  This method only pertains to Conventional loans.  Once the appraisal has been done by a lender-approved appraiser, the MI will be eliminated if the loan balance is reduced to 80% or less of the value of the home.  There is a seasoning requirement with this method; however, as the homeowner has to wait two years before having the appraisal done.

Lenders are supposed to have mechanisms in place to automatically reduce the MI when the loan balance reaches 78% of the original price, otherwise it is the homeowner’s responsibility to contact the lender in writing to make a request to eliminate MI.  Also, the borrower can’t have been more than 30 days delinquent on a mortgage over the previous 12 months.

PMI Tax Deductibility Extended Through 2011

January 18, 2011 by · 1 Comment 

Congress has once again extended legislation that makes mortgage insurance (MI) tax deductible for many Americans. The new legislation ensures the tax deductibility of MI on purchase and refinance loans for qualified borrowers through the end of 2011. The legislation itself is no different than what was originally passed in 2007. The MI premiums are still fully deductible for taxpayers earning up to $100,000, and partially deductible for those with incomes between $100,000 and $109,000.

 

Extending MI tax deductibility is an important win for many reasons including:

  • Tax relief is much needed in a time of struggling economic recovery, and continues to help protect the dream of homeownership for many.
  • MI is not only safe and predictable, but it’s also cancelable once the loan amount drops to 78% of the original sales price OR 20% equity can be proven through an appraisal after two years history of timely payments