Hindman, J. Michael, Independent Banker
Helping first-time home buyers and selling more mortgages
As home prices continue to escalate, scraping together a down payment to buy a home is becoming increasingly difficult for many borrowers-especially first-time buyers. Mortgage insurance, however, can be the best way to give more of your bank's borrowers who lack the standard 20 percent down payment a chance to become homeowners. It's a good way to serve your community and fulfill your customers' needs.
According to American Banker, lenders now estimate that 50 to 60 percent of all borrowers carry some form of mortgage insurance. That surprisingly high rate is due, in part, to more home buyer programs targeting first-time, minority and rural consumers. Nevertheless, using mortgage insurance is widespread, even expected. Investor's Business Daily reports that privately insured mortgages have grown at 35 percent in each of the past two years.
Recent competition among insurers makes mortgage insurance faster, easier and less expensive to buy-and it opens more advantages and alternatives than ever before. This can be good news for your bank and your customers, who now have more reasons to accept mortgage-insured financing.
PROTECT YOUR BANK
Just because a home loan requires mortgage insurance doesn't mean that the borrower isn't creditworthy or that the mortgage isn't investment quality. Simply put, mortgage insurance exists solely to protect lenders against losses if borrowers default. It's a smart move for any high loan-to-value ratio loans.
Mortgage insurance also gives you the ability to make more loans, and increase your fee income. These loans open doors to new customers-helping fulfill Community Reinvestment Act requirements.
Community banks certainly benefit from the many changes taking place as competition heats up among mortgage insurers. Many industry carriers now offer several choices to help borrowers lower the overall cost of mortgage insurance, get insurance faster and make payments easier (through extended payment plans).
Additionally, technological advances in automated underwriting are making mortgage insurance easier for lenders to obtain and process. …