Lenders are now doing away with the fab combo loan 80-10-10 for most situations.Notices sent bankers and brokers freaking and scurrying to lock loans and force clients to close earlier than they wanted to.

     The 80-10-10 allows a simultaneous closing of 2 mortgages up to a CLTV of 90%.This avoids paying PMI and other extra fees and expenses.The second loan holder has a greater level of risk and takes out insurance to cover any losses in case of default of the second.

     Here go the problem:the insurance companies no longer want to insure these loans, so the lenders are pulling out.This all began with the news from Wells Fargo saying that they will have losses and write offs from this increased exposure.

     No income verification second mortgages with a CLTV over 80% are gone.Full doc seconds can still be had, but the LTV requirements are lower and FICO scores have been increased.
     To replace this combo product, the borrower must take out one loan and pay the PMI.(Just like in the old days!)Some stated combo loans are still floating around but only up to total loan amount of 417,000.

     If your broker tells you not to worry, worry.A few banks have pulled out this week and I am sure the big boys will be leaving dust behind them rather soon.At no concern to the borrowers left behind, have great concern for you.

Be informed.

– Dale Siegel