The cost of private mortgage insurance -- required by most lenders on loans with less than a 20 percent down payment -- is going up, even for borrowers with credit scores considered well above subprime.
Government-chartered mortgage financers Fannie Mae and Freddie Mac have increased surcharges for borrowers with credit scores below 680, well above the 620 threshold sometimes used to define subprime borrowers, and will require down payments of at least 5 percent on all loans in "declining markets." New flow business pricing announced in November by Fannie and Freddie create new surcharges on most loans purchased after March 1 for borrowers with credit scores below 680. The surcharges range from 0.75 percent for borrowers with FICO scores between 660 and 679 to 2 percent for borrowers with scores less than 620. Lenders are already passing the new loan-level price adjustments -- which apply to loans with down payments of less than 30 percent -- on to borrowers.Private mortgage insurers PMI Group Inc. and MGIC Investment Corp. have raised or are raising rates for borrowers with lower credit scores and loan-to-value (LTVs) ratios above 95 percent. Both companies have discontinued mortgage insurance on loans with LTVs above 95 percent for borrowers with credit scores below 620.