Private mortgage insurance rates have skyrocketed as a result of the COVID-19 pandemic. As states start to slowly reopen businesses, there’s a lot of uncertainty when it comes to the economy, especially real estate. While mortgage interest rates are historically low, mortgage insurance (MI) is a different story. Mortgage interest rates aren’t the only thing that determines what you, the homebuyer, pays month-to-month. In fact, MI rates have a big play in your monthly payments.
What is Mortgage Insurance?
Mortgage insurance (MI) protects the lender if you put less than a 20% down payment on a home, which can be a heavy lift, especially for first-time buyers. Mortgage insurance allows borrowers to bring a smaller down payment initially and still qualify for a mortgage, opening the market to thousands more homebuyers.
Read more: When Financing PMI Makes Sense
Mortgage Insurance Rates Rise during Pandemic
While the six MI companies are falling in line with the latest Government-Sponsored Enterprise (GSE) policies for federally insured loans, those same protections do not apply to prospective borrowers.
“MI rates are risk-based,” said MI expert and PMI Rate Pro Founder, Nomi Smith. “Mortgage Insurance Companies will look at a homebuyer’s credit, income, and many other factors to give a personalized quote. Because of the risks that COVID-19 has presented, they’ve started increasing their rates, so it’s even more important for loan officers to be shopping for quotes at all of the mortgage insurance providers.”
What does this mean for LOs?
To put it simply, mortgage insurance companies are adjusting for potential defaults on current loans by raising the rates for incoming borrowers. In addition to rate spikes, some niche PMI options may become eliminated. According to MGIC’s statement in early April, cash-out refinances and investment properties will not be eligible for any form of mortgage insurance, and the GSEs flexibilities will not apply to loans of over a million dollars.
HousingWire reported earlier this week that 8.4% of home loans in the U.S. have gone into forbearance, or suspended payments, since the pandemic began. In case that number doesn’t register, we’re talking about 4.2 million mortgages across the country that have defaulted on payments. For reference, before COVID-19, the overall forbearance rate was just 0.25%. The spike can be attributed to the 14.7% U.S. unemployment rate in April, an all-time high.
Needless to say, it’s a busy time for loan officers. However, their focus is still on providing the best service possible, especially now. According to Dan Sogorka, CEO and President at Sagent Lending Technologies, customer care may be the most crucial element of operations for loan officers in the coming months.
“By providing borrowers with the tools and information they need to stay in their homes, servicers improve not only borrowers’ quality of life but also their own bottom line,” Sagorka wrote in a recent National Mortgage News article. “As the economy recovers and borrowers return to work, the technology that powered excellent customer care during the crisis will position servicers to maintain efficiencies and deliver the kinds of experiences that drive loyalty for years to come.”
PMI Rate Pro, a private mortgage insurance quoting tool, transforms the PMI quoting process with innovative software that provides rates from every mortgage insurer in seconds. By providing accurate quotes for homebuyers in seconds, loan officers are able to win more deals while saving borrowers money on their insurance rates. The company was founded by Nomi Smith and Luke Landau, two tenured mortgage officers who recognized that homebuyers have been overpaying for private mortgage insurance for decades.
“Homebuyers are interested in saving as much as they can and in today’s climate, who can blame them?” said Smith. “PMI Rate Pro was developed out of necessity. We save lenders time, increase their conversions, and most importantly, help homebuyers save.”
PMI Rate Pro gives loan officers direct access to the cheapest quotes to begin with so they can focus on what matters, forming those essential relationships with homebuyers.