USAA Mortgage and declining markets (private mortgage insurance, loan officer, interest rate, escrow)

[wankel7]

I had my pre approval all set with USAA. I had a pending offer on a short sale that took almost 100 days to get approved. I would check weekly on the USAA website to see rates. I would input the state, city, and county. Along with loan data that showed a 5% down payment. Everything looked great.

Then, my contract got accepted. Three hours latter USAA called me. Congrats on the home. However, your zip code is in a declining market. Instead of 5% down we need 10% down.

I said, but I have been checking on your website. 5% down works!

They said sorry.

Fannie Mae appears to be their source of cash. And FM calls the shots not USAA.

Words can't describe how disappointed I am in USAA right now. And to cap off my disappointment I just got a junk mail postcard for USAA saying how I was pre approved and USAA would stand by me while I look for my dream home. Wow. Thanks USAA for nothing.

This is an interesting article. USAA yanked financing the DAYS BEFORE CLOSING because the home was suddenly in a declining market and the buyer couldn't cough up the extra 5%.

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/12/AR2008011200269.html

I really guess everything for a reason and I was not meant to use USAA's financing.

I wanted to pass on my experience to make sure anybody under contract with USAA is aware what could happen.

[ShanetheMortgageMan]

Sorry to hear about your situation. Where are you buying (county/state) and what is the rest of your situation? Perhaps we can recommend if another lender would be able to do your loan with just 5% down or not, or perhaps FHA would be a possibility as FHA only requires 3% down (regardless if it's in a declining market or not).

Just another great example of why it's important to work with a loan officer who is current on industry guidelines & upcoming proposed or anticipated changed. Fannie Mae actually no longer requires a 5% reduction in the LTV due to the property being in a declining market, this was decided back in May of this year. You can read Fannie Mae'e announcement on it here. Now the mortgage insurance provider USAA is using might require a 5% reduction - that is very common. Perhaps the LO just was misinformed on why the reason they are requiring a 5% reduction.

Further, rates you find on a website should rarely be relied upon and should never assume that because putting a scenario into a "rate engine" generates an interest rate that the figures you entered meet the guidelines. There are situations where it's accurate, but to assume that it's accurate without further due dilligence would be misleading.

[shammy79]

I am sorry this has happened to you. I am a lifelong USAA member and love their services. However, when it came time to go mortgage shopping, I uncovered that USAA does not handle their own mortgages, but rather farms them out to be serviced by an affiliate- PHH Mortgage Services. I can only speculate this is why you did not receive the level of customer service that USAA is so renound for. PHH on the otherhand has developed their own (not so great) reputation.

[ndb3]

Does anyone know of a lender that will actually allow 95% LTV in declining markets?? I would think there has to be at least one if Fannie Mae allows it.

[Daddys///M3]

Originally Posted by ndb3

Does anyone know of a lender that will actually allow 95% LTV in declining markets?? I would think there has to be at least one if Fannie Mae allows it.

You may be able to find a portfolio lender or credit union (if you are a member) that would be willing to originate a 95% loan in Vegas. The problem is that it is not the lenders or the agencies, it is the MI companies that are mandating the reduced loan to value in the declining markets.

[kani-lehua]

as posted in another thread:

we have been working with a mortgage broker in acquiring a loan. we got pre-approved and went shopping for a property; put earnest monies into escrow; got the appraisal and home inspection; met contingencies of the lender; received pre-disclosure packet (truth in lending, wholesale lock and good faith estimate) from the lender and they now have rejected our loan saying that we are buying the property as an investment instead of as an owner occupant. we've spent close to $3k on this transaction that more than likely will not materialze. we even had to extend escrow. now it's come down to taking out a first mortgage on our current residence that we were going to rent. such a small loan of less than $150k, purchase price of $185k and 20% down or more. the broker is now trying to work with a "portfolio" lender as daddys///m3 has mentioned.

[JohnVeenstra]

Fannie Mae had a declinig market policy at the beginning of the year. They do not have one anymore. The problem is with Private Mortgage Insurance (PMI). Fannie Mae used to rquire 10% down payment in declining market. When you put less than 20% down payment, PMI is required. So, Fannie Mae discontinued their policy becaUSe they know that you need PMI. So, they just let the PMI company decide. Now, there are five major PMI companies. They all have have thier own method of determining declining market areas. It is possible that one PMI comapny may not have a declining market designation when the other four would. I am a member of USAA
as a prior military person, however, I do not do their mortgages and do not know which PMI company they use. For example, here in NJ we use all five PMI companies. Right now the PMI PMI company has the most lenient declining market area designations. There are many areas in NJ where four of the PMI companies require 10% down payment but 5% down is OK with PMI PMI Company. So, the moral of the story is, not knowing your property location, it is possible that one may be OK with 5% down.
Alternatively, as someone else suggested above, FHA mortgages usually (not with all lenders) have declining market problems and 5% or even less down payment is OK.