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So check this out. FHA is discussing lowering their mortgage insurance premiums! Yes, you heard it here first! They were thinking about it last year but the chance of it happening then was pretty low but NOW… half way through 2016, the chance of a MIP reduction is fairly high! Apparently 60% to some industry professionals. Now, most Industry folks believe this would be a good thing and I’m sure future homeowners would agree. Affordable housing, not a bad thing. But not so fast. MGIC, President CEO, Patrick Sinks questions the idea and really the role of FHA. Now let me set the stage here. Patrick’s company, MGIC, provides an alternative to the government FHA loan. It’s the private or conventional option if you will. For the consumers out there watching let me break it down even further. The only reason we can purchase homes with low down payments is due to mortgage insurance companies that insure lenders against loss. Otherwise we would all have to put 20% down. Low down payments loans are risky and the only reason lenders make them is this insurance policy that makes them whole if a consumer defaults. Makes sense? Well, you have the private sector on one hand, MGIC and other Private Insurance Mortgage companies. We’ll call them all PMI! And on the hand you have the government sector, FHA. Both provide similar options. Private Mortgage Insurance or PMI ruled the land for quite some time as you see. They are the blue line. The great recession hit and PMI’s market share dives and FHA’s market share (the green line) sky rocketed and it has since tried to find level footing. FHA currently in the lead as you can see. So, you can kinda see why Patrick, the CEO of MGIC, is questing whether this a good idea or not. Now at first glance, this may seem like a bit of a sour grapes situation. The CEO is just mad that his company continues to lose business from the government FHA option.
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