"You've Caught the NET!"

head_left_image

CHICAGO AREA Now on PMI Declining Market Lists! Buying A New Home Here Now Tougher!

This one seems to have snuck up on us!

It was prompted by coverage in the Wall Street Journal, in their "Developments" blog yesterday - "Home Prices Are Low, But Getting A Mortgage is Tough!"

Chicago - the entire metro area - is now on AIG United Guaranty's Declining Markets List.  This has occurred, despite the fact that our Real Estate Market here is vibrant, even growing, in many Chicago Neighborhoods and suburbs!

AIG's answer to this - they cannot more precisely identify "declining market areas."  Would you agree with this?  Didn't think so!

We all know the mortgage market has been battered by default over the past year.  High-leverage conventional financing is just about gone.  Stated income loans are just about gone.  And Mortgage Insurance Companies are feeling the heat as well - many of the loans they insured are now in foreclosure, and the equity they counted on to make themselves whole has disappeared.

Mortgage Insurer Triad Guaranty, Inc. is leaving the Mortgage Insurance business.  MGIC is raising its MI Premiums nearly 12%.  And the beat goes on!

But what does this mean, in practical terms?

Even those with a previously-comfortable 10% down payment may have to pay a 5% "declining market fee" in order to close.  Often times, the buyers are told this very close to closing - and they just don't have the reserve funds to cover, especially on short notice!  They often have to walk away from their purchase.

As recently as a year ago, many were singing the death knell of PMI.  With the liberal lending standards of a couple of years ago, many home buyers were able to avoid paying for PMI by taking out two separate loans against their new homes - a main loan for 80% of the purchase price, plus a second, higher-rate loan to cover between 10 and 15% of the outstanding balance.  Thus, PMI was not required.

Today, however, such "piggyback loans" have virtually disappeared, and more of those with a low down payment are forced to purchase mortgage insurance.  The percentage of new home buyers using PMI increased from 8.5% in early 2006, to 20% during the Fourth Quarter of last year.  Since then, into 2008, the percentage of buyers seeking PMI has come down to roughly 13% - many low-down-payment buyers have simply left the market!

An increasing number of borrowers are turning to FHA Loan Programs as PMI requirements become tighter.  FHA is more liberal in its credit and down payment requirements - as little as 3% down can get a borrower an FHA Loan - although FHA recently began charging those with riskier credit histories a premium on the loan.  Importantly, FHA loans are not subject to "declining market" lists!

It is estimated that FHA loans now make up between 10 and 12 percent of new home loans, up from 3% two years ago, when conventional loans were easier to obtain.

In reality, many would think the falling prices in today's Chicago Real Estate Market would have the buyers marching in.  Many do - but many have been disappointed when they can't find financing!

See our post from yesterday evening at BlogChicagoHomes.com for more information, as well as a link to Amy Merrick's article in yesterday's Wall Street Journal.  Amy's article contains a current map of Mortgage Insurer AIG Guaranty's Declining Market List.

Here's the PDF file delineating the affected market areas and zips.

DEAN & DEAN'S TEAM CHICAGO

Comment balloon 2 commentsDean Moss • July 16 2008 07:35AM
CHICAGO AREA Now on PMI Declining Market Lists! Buying A New Home…
share
This one seems to have snuck up on us! It was prompted by coverage in the Wall Street Journal, in their "Developments" blog yesterday - "Home Prices Are Low, But Getting A Mortgage is Tough! " Chicago - the entire… more
NICKELS AND DIMES - YOUR Financial Stress Level in Today's Real…
share
Good Morning, ActiveRainers! Are you holding up ok? Financially, I mean? It seems, sometimes, the daily drumbeat of discouraging economic news turns into a din. High inventories. Long market times. Declining prices, in some areas,… more
FANNIE MAE, FREDDIE MAC Now Have "Safety Net" from Fed, U. S…
share
The U. S. Secretary of the Treasury the Federal Reserve Board and The President consider Fannie Mae and Freddie Mac key to turning around the real estate market downturn nationwide. Should these two government-sponsored Mortgage Investors and… more
FLOYD WICKMAN FORUM, ANN ARBOR MI - JULY 12, 2008 - A FEW GEMS!
share
Hey, gang! Our entire Team just returned from our Annual Summertime Visit to see Floyd Wickman and his trainers at his annual Forum in Michigan. Here are a few gems we came home with from the journey - 1. It's incredible coming together… more
NEW FED MORTGAGE GUIDELINES UNVEILED - Will Apply To All New Loans!
share
Will new loan rules passed unanimously today by the Federal Reserve Board better protect home borrowers? Or, will they even further dampen borrowing power of prospective homeowners, and have a negative effect on the already-depressed housing market… more
Chicago IL Market Statistics Update - July 14, 2008
share
I'm trying to get a head start on the day with this earlier-than-usual post! Here's the latest Stat Summary on the Chicago Real Estate Market based on data pulled yesterday evening, July 13, 2008 - Active Listing Inventory remained… more
RESTORING HISTORIC CHICAGO HOMES - A Labor of Love, with A Little…
share
In many parts of the country, I would assume, tax and public incentives for restoring worn, yet historic homes and commercial buildings are readily available. In order to get the money, however, those renovating have to comply with certain detailed… more
FROM FLOYD WICKMAN'S FORUM YESTERDAY IN ANN ARBOR MI - The R Group…
share
Late Saturday night, folks, and Sue and I are back in our room after an incredible day at Floyd Wickman's Annual Forum in Ann Arbor MI. What a POWERFUL EVENT, as a small group of just under 80 top, motivated agents from across North America -… more
Lil' Buddy's Blog: Chicago Public Schools - Less Road Training for…
share
THE CHICAGO IL REAL ESTATE MARKET, AND OTHER THINGS CHICAGO, FROM THE POINT OF THE VIEW OF A LITTLE WHITE DOG! This photo, taken by my humans, Dean & Sue while we all visited our close friends and mentors in St. Paul MN last week. It… more
SENATE LIKELY TO PASS HOUSING BILL - But Will House, President Bush…
share
Hello, All! The long-awaiting Housing Reform Legislation seems likely to pass the U. S. Senate next week. The effect on markets faced with high housing inventory and slack demand, along with tight loan underwriting standards - including parts… more