During the crash, borrowers in California, Florida, Nevada and Arizona needed a credit score of at least 700 and could have a maximum loan-to-value ratio of 90 percent to qualify for mortgage insurance with MGIC, said Sal Miosi, vice president of marketing at the Milwaukee-based firm.
Added Complexity
Last month, the third-largest U.S. mortgage insurer limited rules so borrowers whose loans qualify for purchase by Fannie Mae or Freddie Mac with credit scores of at least 620 and a loan-to-value ratio up to 97 percent can get insurance coverage, according to Miosi.
Additional restrictions “weren’t contributing to the credit quality, they were just adding to complexity,” he said.
Genworth Financial Inc., the fourth-largest mortgage insurer in the country, broadened credit guidelines in the first quarter of 2013 and reduced pricing, Rohit Gupta, chief executive officer of the company’s U.S. mortgage insurance business, said in an e-mailed statement.
Banks are still taking a cautious credit posture, according to David H. Stevens, CEO of the Mortgage Bankers Association.
“You’re starting from a very narrow market, so any expansion wouldn’t go near the reckless lending practices of the early 2000s,” he said. “We’re in the most conservative overall credit environment for housing finance that we’ve seen in almost three decades.”
Risky Lending
A decrease in access for interest-only loans and those with terms longer than 30 years led to a slide in a Mortgage Bankers Association measure of loan availability last month.
Those types of loans are less attractive to banks as planned rules created by the Consumer Financial Protection Bureau to curb abusive or risky lending kick in next year.