Radian Group, Inc. a major insurer of private mortgage insurance for conventional financing announced today that they will temporarily no longer offer mortgage insurance for purchase money loans in CA. Until recently, Radian was among the last mortgage insurance provider offering higher loan-to-value ratios, above 90%, for qualified homebuyers.
It turns out that Radian was insuring too many loans in CA, NV, AZ and FL. And since they realized their heavily weighted market share of over 50% of their insured loan volume were in these states Radian made the decision to temporarily suspend any new mortgage insurance in these states. Radian gained their market share from their more aggressive guidelines over other mortgage insurance companies who limited their exposure by enforcing declining market policies that capped their maximum allowable loan-to-value ratios.
With Radian pulling out of the CA loan market only a few sources remain which limit loan-to-value ratios to a maximum 90%. This means that if buyers choose to purchase a home with a conforming loan amount, funded through Fannie Mae or Freddie Mac offering the lowest interest rates possible, they will now have to put 10% down.
With interest rates offered on mortgage programs already 1% higher this year, higher down payment requirements are coming at an already tumultuous time in the housing market. Although there are still plenty of incentives left to keep homes sales trucking along through the summer, this news will not benefit our market place as it is just on the verge of recovery.
The good news is that FHA insured financing is still being offered with as little as 3.5% down up to $729,750 loan amounts in high cost counties, and there are plans to allow first time homebuyers the ability to borrower their qualified Federal tax credits upfront to cover their closing costs in the form of a bridge loan made by the State of CA.
