PMI is also a hot issue that has been addressed through litigation because it was often abused by unscrupulous lenders. Today a lender must explain to you at closing how to cancel your PMI when you have reached the 20% equity threshold. The lender must also inform you annually that, if you reach the 20% equity threshold, you can cancel the PMI.
Due to the insecurity of the future, not everyone relies on staying in their home for the long term. People lose jobs, change partners, have families, or refinance. With any and all of these changes happening in people’s lives all the time, not everyone wants to pay money up front. Statistics show that if you make a down payment of less than 20%, there is reason to believe you will refinance within the first three years of your mortgage.
Points have gained a bad reputation for several reasons. One is because homeowners can end up paying for points without knowing it. The term "point" is often used interchangably with the terms "loan origination fee," "loan discount," and "discount points."
The easiest way to find out is to ask your loan officer if you are paying any points. Make sure you check over your closing costs and have your real estate attorney do the same at closing.
The problems in the private mortgage insurance industry may get worse before they get better, analysts at Fitch Ratings say, with loans insured in 2007 showing "significantly higher levels" of first-year delinquencies than the 2006 and 2005 "vintages."
The expected losses could limit the ability of existing mortgage insurers to grow their portfolios, and open the door for startup companies to meet the needs of Fannie Mae and Freddie Mac, Fitch analysts said.
"Over the course of 2008 and 2009, given the relative performance and size of the 2007 vintage compared to the 2006 and prior vintages, Fitch expects that the mortgage insurance industry will need to continue posting very high loss reserves as the industry’s pipeline of troubled mortgages becomes increasingly made up of 2007 vintage loans and current loss reserves are paid out as claims," the report said.
Although mortgage insurers should be able to pay claims, their ability to insure more loans will depend on their ability to raise capital, Fitch analysts said. The ability of existing private mortgage insurers to raise capital could be complicated if new companies enter the market.
The government-sponsored entities, or GSEs, "will have an incentive to channel more demand for mortgage insurance toward healthy, growing mortgage insurance companies."
If existing mortgage insurers can’t raise the capital they need to insure more loans, Fitch analysts said, "their importance to the GSEs may become somewhat diminished.