TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1463706
24 | M R EP O RT FEATURE home, they also can become very expensive when the appraisal value comes back less than the buyer's purchase price. Mortgage insurance can be a simple and nearly seamless solution that may also work for buyers facing an appraisal gap. In certain instances, MI may be used to shift the loan- to-value ratio (LTV) and restruc- ture the loan so borrowers can cover appraisal gaps and still have enough money to meet minimum down payment requirements. 3. Preserve the Borrower's Savings E ven for borrowers who could afford a 20% downpay- ment, they may still seek a lower downpayment with MI as an opportunity to set aside some cash as a cushion for uncertain economic times. Also, as interest rates increase, so do investment yields on capital. That means a buyer may be able to earn a better return on invested cash now than in recent years when interest rates were lower. This could help offset the cost of MI. 4. Alternative to Buying Down the Mortgage Rate I f a borrower is concerned about rising rates and the impact they will have on monthly payments, MI may offer a solution. A rate- conscious borrower might pay extra buydown points at closing to reduce their interest rate. But by buying split premium mort- gage insurance with a lump sum up front, that borrower can lower the payment on their MI which in some cases may save them more each month than buying down their note rate on the mortgage. 5. Cancel MI Early With an Appraisal K eep in mind that most MI products are temporary. Once the borrower makes a certain number of payments, or the prop- erty appreciates to a certain value, the insurance may be canceled. When home prices go up rapidly, as they have in recent years, the payment can drop away even faster. For example, in a market where home prices are increas- ing by 10% to 15% each year, a borrower with a strong appraisal could qualify to cancel MI after two or three years with approval from the servicer. It is time to change the narra- tive on MI and view it not as a burden but as a benefit for those who need it. MI has helped more than two million families become homeowners in the last year alone. As the mortgage market shifts rapidly from refinance to purchase, lenders are reposition- ing their focus on how best to structure transactions in this environment. Savvy loan of- ficers will find creative ways to help their borrowers navigate the challenging market. For them, MI may be another means of bridging the affordability gap for homebuy- ers and unlocking hidden value for borrowers in an increasingly competitive market. As EVP of Mortgage Insurance Sales, MARSHALL GAYDEN is responsible for the strategic direction and leadership of Radian Guaranty's national sales force. Gayden's team markets Radian's mortgage and real estate services to grow profitable new insurance written and help customers in all facets of their business. Gayden joined Radian in 2010. During his 35-year tenure in the mortgage industry Gayden has led high performing sales teams in retail, consumer direct, wholesale/ correspondent lending, and mortgage insurance. With a previous employer, he also managed affiliated business arrangements with over 300 individual real estate companies and 1,200 real estate offices nationally. DS News is the only publication in the country solely dedicated to providing default servicing professionals with news and content focused on their industry. SUBSCRIBE NOW! Connect with us online at DSNews.com. SUBSCRIBE TO THE LEADER IN DEFAULT SERVICING NEWS THEFIVESTARINSTITUTE