For those of you that have been following the mortgage industry nightmare, the next part of the puzzle to be thrown in the toilet is Mortgage Insurance. I have several entries within about mortgage insurance, but the basic are as follows:  If your mortgage is greater than 80% of the value of the home, the lenders make the assumption there is risk.   Yes, the risk of default and walking away.  Therefore, they get insurance to cover their loss up to 20% of the value in case of foreclosure.  Apparently, there have been many losses taken of late, which have required the MI companies to pay out.   We all know from our health insurance that they hate to pay.  Therefore, premiums have risen for mortgage insurance.  Projections of future foreclosures have created a scare in the mortgage insurance industry, which required them to tighten the guidelines for borrowers.   These guidelines are: lowering the loan to value to 90%, raising minimum FICO scores and making it more difficult to obtain MI for second homes and investment properties. What this does, in addition to increase housing costs is making it more difficult to obtain MI.  If you do not have the money to put down on a house and have borderline credit, the mortgage might be impossible to get.  This will add another layer of non-qualified borrowers to the pool.   Far-reaching affects will be fewer houses sold.  In pocket areas where values are declining, they will decline further.  I still say this is only the beginning.  Watch supply go up even further, which will decline values even more. – Dale Siegel