11.09.05

Central National Bank Introduces Breakthrough Mortgage Insurance Product

PRESS RELEASE

Under a mortgage insurance program introduced today by Central National Bank, borrowers with strong credit profiles can qualify for mortgages with substantially reduced monthly mortgage payments.

The program, called MI Free Loan, is lender-paid mortgage insurance (MI). Not only will MI Free Loan 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.

"MI Free Loan is another MI option offered by Central National Bank that makes home ownership more affordable for the consumer," said Tina Barker, Vice President of Mortgage Lending. "Today, many borrowers with strong credit profiles are choosing piggybacks because of the lower monthly mortgage payments and enhanced tax deductibility. MI Free Loan will be of particular interest to 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. MI Free Loan eliminates the need for two loans resulting in a single affordable mortgage.

When buying a $200,000 home with a 5% down payment, MI Free Loan would result in a monthly mortgage payment that is about $50 less than a typical piggyback structure involving closed-end second mortgages. Central National Bank is proud to be a leader in the Mortgage Lending Industry by including MI Free Loan into their product mix.

"MI Free Loan is a breakthrough MI product that will help Central National Bank reduce the cost of home ownership for many of the borrowers we serve," said Barker. "It’s really a winning product. Borrowers get a competitive payment and the convenience of writing one check each month."

MI Free Loan is available on consumer-friendly loan products with low or no down payments, 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.

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. MI Free Loan, a 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.

More information about the new LPMI product can be requested from Central National Bank at info@centralnational.com.