MILWAUKEE, Aug. 19 /PRNewswire-FirstCall/ -- Under a mortgage insurance (MI) program introduced today by Mortgage Guaranty Insurance Corporation (MGIC), borrowers with strong credit profiles can qualify for mortgages with substantially reduced monthly mortgage payments.
The program, called SingleFile(TM), is lender-paid MI. Not only will SingleFile reduce the monthly mortgage payment versus other MI options, but it will result in a lower monthly payment than many so-called "piggyback" mortgage structures while producing the same tax benefits.
"SingleFile is another MI option offered by MGIC that makes homeownership more affordable for the consumer and provides the necessary insurance protection for the lender and investor," said Patrick Sinks, Executive Vice President - Field Operations at MGIC. "Today, many borrowers with strong credit profiles are choosing piggybacks because of the lower monthly mortgage payments and enhanced tax deductibility. SingleFile will be of particular interest to many of these borrowers because it will result in the same tax benefits and even lower monthly mortgage payments and allow them to maintain financial flexibility and certainty."
A piggyback mortgage structure is one in which the borrower obtains a second mortgage at purchase, thus reducing the first mortgage loan-to-value ratio to 80 percent, eliminating the need for MI. In recent years, piggybacks have been marketed to consumers as a way to minimize monthly mortgage payments and maximize the mortgage interest deduction. While piggybacks have grown in popularity, they involve the origination and servicing of two separate loans. SingleFile eliminates the need for two loans resulting in a single affordable mortgage.
When buying a $200,000 home with a 5% down payment, SingleFile could result in a monthly mortgage payment that is about $50 less than a typical piggyback structure involving closed-end second mortgages. Flagstar Bank, based in Troy, Michigan, is one of several lenders currently implementing SingleFile into their product mix.
"SingleFile is a breakthrough MI product that will help Flagstar reduce the cost of homeownership for many of the borrowers we serve," said Steve Brooks, Executive Vice President, Lending Operations, at Flagstar Bank. "It's a win for everyone. Borrowers get a competitive payment and the convenience of writing one check each month, and brokers and lenders simplify their loan processing, thus lowering costs."
SingleFile is available on consumer-friendly loan products, such as fixed- rate mortgages and adjustable-rate mortgages with limited rate adjustments. By comparison, piggyback structures can include second mortgages that are balloons or HELOCs (home equity lines of credit) in which rates can adjust early and often.
"While piggybacks that involve variable-rate HELOCs tied to prime may result in a lower monthly mortgage payment initially, those mortgage payments will rise if the prime rate trends higher from historic lows," notes Sinks. "If this occurs, a piggyback involving an adjustable HELOC tied to prime could become more costly than a loan with SingleFile."
Lender-paid MI (LPMI) differs from traditional borrower-paid MI (BPMI) in that the lender pays the premium, and the loan has a slightly higher interest rate. With BPMI, the borrower pays for the premium separately through a monthly escrow. SingleFile, an LPMI product, lowers the overall cost of MI while providing the protection from default losses often needed to enable lenders and investors to make low-down-payment mortgage loans.
"LPMI has been in the marketplace for years, but the higher interest rate associated with LPMI has historically presented a marketing challenge for lenders," said Sinks. "With SingleFile, that interest rate differential has been greatly reduced. As a result, we believe that when presented with all the various mortgage options, borrowers will choose SingleFile as the logical choice."
The availability of SingleFile is subject to the approval of state insurance regulators. Lenders should contact their MGIC Account Manager for more information.
About MGIC
MGIC ( http://www.mgic.com/ ), the principal subsidiary of MGIC Investment Corporation , is the nation's leading provider of private mortgage insurance coverage with $180.4 billion primary insurance in force covering 1.47 million mortgages as of June 30, 2004. MGIC serves 5,000 lenders with locations across the country and in Puerto Rico, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality.
MGIC Investment Corporation
The program, called SingleFile(TM), is lender-paid MI. Not only will SingleFile reduce the monthly mortgage payment versus other MI options, but it will result in a lower monthly payment than many so-called "piggyback" mortgage structures while producing the same tax benefits.
"SingleFile is another MI option offered by MGIC that makes homeownership more affordable for the consumer and provides the necessary insurance protection for the lender and investor," said Patrick Sinks, Executive Vice President - Field Operations at MGIC. "Today, many borrowers with strong credit profiles are choosing piggybacks because of the lower monthly mortgage payments and enhanced tax deductibility. SingleFile will be of particular interest to many of these borrowers because it will result in the same tax benefits and even lower monthly mortgage payments and allow them to maintain financial flexibility and certainty."
A piggyback mortgage structure is one in which the borrower obtains a second mortgage at purchase, thus reducing the first mortgage loan-to-value ratio to 80 percent, eliminating the need for MI. In recent years, piggybacks have been marketed to consumers as a way to minimize monthly mortgage payments and maximize the mortgage interest deduction. While piggybacks have grown in popularity, they involve the origination and servicing of two separate loans. SingleFile eliminates the need for two loans resulting in a single affordable mortgage.
When buying a $200,000 home with a 5% down payment, SingleFile could result in a monthly mortgage payment that is about $50 less than a typical piggyback structure involving closed-end second mortgages. Flagstar Bank, based in Troy, Michigan, is one of several lenders currently implementing SingleFile into their product mix.
"SingleFile is a breakthrough MI product that will help Flagstar reduce the cost of homeownership for many of the borrowers we serve," said Steve Brooks, Executive Vice President, Lending Operations, at Flagstar Bank. "It's a win for everyone. Borrowers get a competitive payment and the convenience of writing one check each month, and brokers and lenders simplify their loan processing, thus lowering costs."
SingleFile is available on consumer-friendly loan products, such as fixed- rate mortgages and adjustable-rate mortgages with limited rate adjustments. By comparison, piggyback structures can include second mortgages that are balloons or HELOCs (home equity lines of credit) in which rates can adjust early and often.
"While piggybacks that involve variable-rate HELOCs tied to prime may result in a lower monthly mortgage payment initially, those mortgage payments will rise if the prime rate trends higher from historic lows," notes Sinks. "If this occurs, a piggyback involving an adjustable HELOC tied to prime could become more costly than a loan with SingleFile."
Lender-paid MI (LPMI) differs from traditional borrower-paid MI (BPMI) in that the lender pays the premium, and the loan has a slightly higher interest rate. With BPMI, the borrower pays for the premium separately through a monthly escrow. SingleFile, an LPMI product, lowers the overall cost of MI while providing the protection from default losses often needed to enable lenders and investors to make low-down-payment mortgage loans.
"LPMI has been in the marketplace for years, but the higher interest rate associated with LPMI has historically presented a marketing challenge for lenders," said Sinks. "With SingleFile, that interest rate differential has been greatly reduced. As a result, we believe that when presented with all the various mortgage options, borrowers will choose SingleFile as the logical choice."
The availability of SingleFile is subject to the approval of state insurance regulators. Lenders should contact their MGIC Account Manager for more information.
About MGIC
MGIC ( http://www.mgic.com/ ), the principal subsidiary of MGIC Investment Corporation , is the nation's leading provider of private mortgage insurance coverage with $180.4 billion primary insurance in force covering 1.47 million mortgages as of June 30, 2004. MGIC serves 5,000 lenders with locations across the country and in Puerto Rico, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality.
MGIC Investment Corporation
© 2004 PR Newswire
