It is funny how efficient markets are. Private Mortgage Insurance use surged just as lenders were cutting off the spigot of using subprime loans and reducing the inventory of 80 percent First Mortgages and 20 percent Second Mortgages.

Who would have thought that once the funny money 100 percent loans disappeared, people who could not fund a 20 percent downpayment would have to get PMI. Of course, this is just bringing the lending standards back to how they were in 2001.

Applications for private mortgage insurance, or PMI, rose 56 percent to 191,525 in March from February, according to the Mortgage Insurance Companies of America, an industry trade group. Volume fell in April, but remained well above rates from last year.
“The consumer is getting more cautious and returning to the tried and true fixed-rate loan with insurance,” said Susan Wachter, a real estate professor at the Wharton School of Business.
Private mortgage insurance is typically required of a buyer who wants a fixed-rate mortgage but has a down payment of less than 20 percent. It costs a fixed percentage of the total loan, usually less than 1 percent, and insures the lender against default.
About $72.9 billion, or 11 percent, of the $680 billion in new mortgages originated in the first quarter were backed by PMI, according to Inside Mortgage Finance, a weekly industry newsletter.  via MontereyHerald.com

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