Can't get mortgage insurance

[Anonymous]

I'm in the process of buying a condo with 5% down. Everything with my loan is complete with the exception that my bank is now having trouble finding a mortgage insurer to insure my loan. I filed bankruptcy about 3 1/2 years ago, which my lender was well aware of. BOA is now telling me that most companies want at least 4 years ago regarding the bankruptcy. Two of the largest insurers they deal with have already declined my loan. We're waiting to hear from one last one. My lender has requested that I put an additional 5% down in order to make my loan appear more attractive. I haven't read the most recent forums in a while...but has anyone else heard of this or had to deal with this?  Please help!

[ShanetheMortgageMan]

Unfortunately this is becoming more common.  When you put less than 20% down with conventional financing (in this day and age where 2nd mortgages aren't very common above 80% CLTV) mortgage insurance is generally needed.  So not only do you have to qualify for mortgage program's guidelines, you also need to qualify for the mortgage insurance provider guidelines.  Condos are becoming extremely difficult to insure, if mortgage insurance providers will insure them at all.  In many states with severe declining values, such as California & Florida, many mortgage insurance providers won't even insure on condominiums.  If you are in a declining market, then a completely different set of mortgage insurance guidelines would apply.  Each mortgage insurance provider has a "zip code lookup tool" which you can see if you are in a declining market or not.  Off the top of my head I can't recollection who permits less than 4-years BK.  But the links where you can check out mortgage insurance providers guidelines are:

http://www.pmi-us.com/resourcecenter/mi_guidelines.html (PMI)

http://www.rmic.com/ratesguides/guides/Pages/default.aspx (RMIC)

http://mortgageinsurance.genworth.com/RatesAndGuidelines/Default.aspx (GI)

http://www.mgic.com/guides/guides.html (MGIC)

http://www.radianmi.com/mortgage/rates.aspx (Radian)

https://www.ugcorp.com/miunderwriting.html (AIG)

http://www.tgic.com/ (TGIC, no longer writing new mortgage insurance policies)

Message Edited by ShanetheMortgageMan on 10-08-2008 04:51 PM

[Anonymous]

Wouldn't the bank have known this would've been a problem before taking my loan? This is my first time buying a home and I know the economy is crazy, but this is the last thing that I thought would happen. I just feel like the bank should've known before I came this far. I expected to have closed by now.

[ShanetheMortgageMan]

If I was doing the underwriting it's definitely something I would've checked out before proceeding very far with your application - but most lenders order their mortgage insurance (MI) certificate as one of the last steps in the process.

In their defense, often MI guidelines will change in the middle of the loan process.  I had a situation where I was helping someone buy a home and it was a really long escrow period, I knew MI guidelines were changing so I pressed the underwriter to order the MI cert sooner rather than later, and it saved the deal because by the time we were ready to close, MI providers were no longer insuring 5% down in a declining market.