MGIC Turns the Screws on MI Underwriting

MGIC Investment Corp. (MTG) said late Thursday that it will pull back the reins on its mortgage insurance underwriting standards for the second time this year, after announcing sweeping changes to its programs that went into effect March 3. The changes announced yesterday are scheduled to go into effect June 1, and are among the most stringent standards in the industry, based on a review by Housing Wire. For all markets — so-called restricted markets or otherwise — MGIC said it will essentially no longer provide MI for any Alt-A loan. The company also said that it will no longer allow cash-out refinances in any market, investment properties, multiple units, and option ARMs to be eligible for its mortgage insurance. The insurer also will require a minimum of 3 percent down on any eligible purchase transaction, following a similar underwriting policy at PMI Group Inc. (PMI). Underscoring the tough Florida housing market, MGIC also said it will rule out any loan in Florida tied to condos or attached housing. Perhaps more telling are the insurer’s tough new requirements for conforming jumbos, the name given to loans made temporarily eligible for GSE purchase under the terms of the Economic Stimulus Act of 2008. In certain “high-cost” markets, the GSEs may purchase loans up to $729,500, depending on HUD’s assessment of housing prices. Loans in the conforming jumbo range — in a non-restricted market — must have a minimum of 90 percent CLTV and a minimum FICO of 700 to qualify for MGIC underwriting; in restricted markets, the CLTV requirement is tightened to 85 percent. MGIC said it will not insure any loan above $650,000 in any market. Sources told HW that the new guidelines represent a significant shift in approach for the insurer, which until Thursday’s announcement had focused on policy restrictions in markets it identified as problematic (MGIC refers to such markets as “restricted”). The June 1 underwriting update adds the entire states of Kentucky, New Jersey and Michigan to its list of such markets, Housing Wire’s review of the list found. For more information, visit http://www.mgic.com. Disclosure: The author held no positions in MTG or PMI when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.