Making list not bad for Brevard.

Brevard County recently made another list, but was it a good list or a bad list?

It was reported last week that mortgage lenders in Brevard County will not lend more than 80 percent of some homes' value. In other words, a homebuyer would be required to come up with a down payment of at least 20 percent to purchase a home.

What does this mean? Let me explain.

Private mortgage insurance, known as PMI in the mortgage business, is issued on loans for more than 80 percent of the value or sale price of a property. This type of insurance is not "life" insurance to pay off the mortgage should you die but rather insurance for lenders who want to protect themselves in the event a borrower defaults on a loan. These loans are called "high-risk loans" with little or no equity from the buyer.

About a quarter of all home loans in Brevard County made between 2002 and 2006 required private mortgage insurance, according to the Federal Financial Institutions Examination Council.
Brevard County was cited as one area of the country in which restrictions have been placed on some kinds of loans of more than 80 percent. The restrictions are aimed at loans on properties that are not owner-occupied or are not primary residences.

I don't consider this a bad list. I think this is a good, safe list.

It will help put loans in the proper place. An investor who cannot afford to put down 20 percent on a property probably should not purchase the property. A person buying a second home who cannot put 20 percent down probably should reconsider buying.

However, a first-time homebuyer with good credit and a stable work history likely will be offered financing of more than 80 percent and likely will qualify for private mortgage insurance.
A buyer who has lost equity through the sale of their home in a market such as this deserves to be able to purchase a home without a 20 percent down payment. This will happen in the current mortgage market.

Not everyone is able to make a sizable down payment on a home, and the mortgage insurance system takes that into account. The headlines initially looked shocking, but the reality of the change in mortgage insurance will work for most homebuyers. Safety measures are placed on us to protect the properties and the people who purchase them and the lenders who finance them. Our market is in the "correction stage."

Conservative measures are not a bad thing. Such measures would have helped eliminate or reduce the number of home foreclosures in the market across the nation.