Nashville Area Getting Hit Hard by Finance Freeze Out
The news has been full of stories about the rash of tornados that we have recently experienced in the United States. We are pushing up on a record as we cross the 1,000 tornado line.
Well in the home loan market, many consumers feel like they have also been hit by a tornado and like the windy version that is even putting people out of homes or keeping them out of new ones. That is especially true in Nashville Tennessee and neighboring Clarskville.
MGIC Investment Corp., one of six major mortgage insurance companies in the nation, will further clamp down on borrowers in the Nashville area in June after adding the entire metropolitan statistical area recently to its list of restricted markets.
The company’s growing blacklist, which now also includes parts of Utah, Connecticut and Kentucky, identifies markets where borrowers must have better credit scores and bigger down payments than normal to get the company’s insurance.
A second national mortgage insurance company toughened up on Clarksville recently.
Home loans are harder to obtain in Nashville area | www.tennessean.com | The Tennessean
What does that mean? Well, it basically means that the insurance companies that insure against defaults are working to reduce their risks in geographical areas where they have statistically seen problems. Its the equivalent of an insurance company charging more for someone looking to insure a home against flooding on the Eastern Shoreline or in South Florida. They are also looking to decrease their pool of potential defaults by making the requirements to qualify for a loan at all more stringent.
You can expect to see more of this issue in the news soon and you will also likely see some people calling this practice out as a new form of redlining, which is illegal. That may or may not be a fair accusation in this case (probably not), but when hard hit areas include urban areas where disadvantage borrowers live, its not always easy to make a different set of rules for the people that live there even if the statistics do show a higher level of risk. It may make logical sense for an actuary, but each of these decisions will be heavily scrutinized by lawyers up one side of the insurance company and down the other by legislators and trial lawyers looking for a cause. Then PMI lenders will wish they got into the pharmaceutical industry to sell Orovo detox diet pills instead of working in mundane areas like research. I predict that there will be a few actuaries that will calculate themselves right out of jobs without even knowing what happened.
