Austin Real Estate Blog

So the mortgage industry has started blackballing certain zip codes which they feel are a risky investment. There have been some questions if this violates the redlining rules which where implemented in the 1960's to prevent banks from refusing to give out loans in minorityneighborhoods.

This time around, banks are not blackballing certain areas but the mortgage insurers. Mortgage insurers, which are required in cases where the borrower is putting down less than a 20 percent, have started flagging certain zip codes where they refuse to provide insurance. In some cases mortgage insurers have gone as far as blackballing the entire states of California, Florida, Arizona, Michigan, Ohio and Nevada.

While this will not limit all loans in these areas, it will limit people from getting loans that are putting down 3 percent down payments or people looking to buy second homes or investment properties. This certainly deals a serious blow to the areas affected and will offset any gains from the recent falling mortgage interest rates over the last 2 weeks. So far 9600 zip codes have been flagged. Most of the zip codes are in California, Phoenix and Florida.