Some more trouble with Private Mortgage Insurance (PMI), which will lessen the availability of mortgages to people who need to borrow over 80% of the value of the home. There are currently five major PMI companies issuing insurance for loans over 80% LTV.

These companies have been having financial trouble of late and have been taking hits on Wall Street. In response to that, and in order to answer to shareholders (Warren Buffet), they have tightened their guidelines for issuing mortgage insurance. Here are a few of our favorite new rules:

– 575 Minimum FICO score
– 620 Minimum FICO score on LTV over 95%
– significantly higher premiums for scores between 620-659

This, I believe will only be the beginning of the new guidelines. I can only guess that a few of the major PMI companies will either merge or go bankrupt by necessity. The borrowers, who need more than 80% LTV, can no longer obtain second mortgages, so the PMI is the only hope. If this is eliminated for them, then there might be no hope of getting a mortgage. No mortgage no home. Stay with Mom or rent. The best is yet to come.

Dale Siegel