Another perk for first-time buyers - job loss insurance

Thanks, Mr. & Mrs. Hill, for pointing out another new perk for first-time home buyers in California: the C.A.R.H.A.F. Mortgage Protection program. This gives first time buyers free mortgage insurance in case of job loss. Check out the link here. (This is not to be confused with lender mortgage insurance.) Here are the requirements:

• Be a first time buyer or have not owned a home in three years;
• Close before December 31, 2009;
• Use a California Realtor (it is a CAR program, after all); and
• Be w-2'd, not self-employed.

A qualified buyer who has involuntarily lost their job can be eligible for up to $1,500 a month in mortgage payments for up to six months. A co-buyer can be eligible for up to $750 a month for six months.

CSI: Real estate and private mortgage insurance

For many years, buyers who put less than 20% down on a home have had to pay private mortgage insurance. This is a percentage fee, tacked on to a monthly mortgage, that protects the lender against default on the loan. The loans are insured. And "pmi" isn't inexpensive for the borrower.

I'm sure this has occurred to many of you before this, but: if there was so much insurance on mortgage loans, why are lenders in such trouble from all the defaults? Where did this insurance money go? Who collected it? Where is it now? Why hasn't it helped stabilize the real estate market? Does anybody know?

Short Sale, Lending and PMI News

Here's some more good news from the lending sector:

Fannie Mae scraps higher downpayment requirements
Friday May 16, 9:54 AM EDT
WASHINGTON (AP) — Fannie Mae says it is doing away with higher minimum downpayment requirements for borrowers in distressed real estate markets.
The government-sponsored mortgage financier said Friday it will require minimum downpayments of between 3 percent and 5 percent for all loans that it guarantees.
That replaces a December policy that required a higher minimum if the loan was for a home in a market with declining real estate prices.
Washington-based Fannie says the move is part of its effort to help resuscitate the flagging mortgage market. Thanks, Dana Dukelow, for the article.

Other lenders are doing the same; however, it appears that the market for second mortgages is shrinking. For the average buyer, this is a mixed blessing: once again, you can get a home with only 5% or 10% down. That's the good news. The bad news is that rather than have two loans (say, one for 80% and one for 10%), a buyer will now have just one loan, but will pay "private mortgage insurance" every month.

In short sale news, it appears that the lenders are finally streamlining the process and it isn't taking so long to get an approval on a purchase contract. Also, in short sale cases where there is both a first and second loan, the holders of the 2nd loan are pretty much giving up and going away for a pittance (about $1000). No wonder the lenders of 2nd loans are dwindling!