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Distressed and Declining Markets
CMG MI's New Policy Goes into Effect April 14, 2008
CMG MI employs a variety of risk management tools to help assess key factors of the housing market, and the real estate lending environment, as well as loan performance. Based on our assessment of these sophisticated tools, various home price index models and delinquency rates, we have observed significant challenges and market downturns in many areas of the country during the past several months.
As a result of housing market performance, and in order to continue to provide support for your ability to facilitate sustainable homeownership for qualified borrowers, CMG MI is introducing a new Distressed Markets Policy that restricts maximum financing for properties located in distressed and declining markets. Distressed and declining markets are defined as:
- specific geographic areas with property values that have already been influenced by foreclosure, unemployment, and other factors affecting the property values in those areas, and
- specific geographic areas with property values that have been declining or are likely to decline.
Please be aware that the CMG MI Distressed Markets List will be updated quarterly or as frequently as needed. You can check back here frequently to see the latest list. You can also use our Zip Code Map to quickly find out if a market is subject to the Distressed Markets Policy.
This CMG MI Distressed Markets Policy goes into effect April 14, 2008.
Your Credit Union needs to review all of the important changes outlined below and make any necessary changes to your systems. You should also make every effort to notify your staff and branches.
Restrictions on Distressed Markets
Effective April 14, 2008, in areas subject to the CMG MI Distressed Markets Policy, CMG MI will require a reduction of five (5) percentage points to the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio allowed by the loan program or product. The maximum LTV/CLTV cannot exceed 95%. For example:
- If the maximum LTV allowed for a Full Doc standard program is 103% or 100%, then the maximum LTV would be reduced to 95%.
- If the maximum LTV allowed for a Full Doc Second Home loan is 95%, then the maximum LTV would be reduced to 90%.
The following additional restrictions will apply in areas subject to the CMG MI Distressed Markets Policy:
- CMG MI will not insure negative-amortizing or option-payment mortgages
- CMG MI will not insure limited doc products
- LTV/CLTVs of 90.01% to 95.00% require a minimum representative FICO® score of 680
- LTV/CLTVs of 90% or less require a minimum representative FICO score of 620
- The maximum LTV/CLTV for condominiums is 90%
- The maximum LTV/CLTV for cash-out refinancing is 85%
- These changes supersede previously issued CMG MI Program variations
This policy applies when the following indicators are present:
- The subject property is located in a MSA/MSAD on the CMG MI Distressed Markets List; or
- The appraisal report indicates declining values; or
- A declining market message from an AUS system is received; or
- A credit union’s independent research reveals that the subject property is located in a declining market
It is particularly important in a declining or distressed market to determine that the value of the subject property is well supported, therefore we recommend:
- Two comparable sales that have closed within the last 90 days prior to the effective date of the appraisal; and
- A current listing of a comparable property to demonstrate the subject property's neighborhood is not continuing to decline; and
- Detailed explanations from the appraiser as to why property values are declining in the area, and what effect falling home prices have had on the value and marketability of the subject property.
To help you and your Credit Union prepare for the change, we strongly recommend you read our FAQ on the CMG MI Distressed Markets Policy, as well as the following:
You should also use our handy Zip Code Map to help identify markets affected by CMG MI's Distressed Markets Pollicy.
CMG MI is committed to achieving affordable, responsible and sustainable homeownership in all of the communities we serve, and we appreciate the opportunity to work with you to achieve this goal. If you have any questions regarding these changes, please contact your CMG MI Account Executive. |