Mortgage Insurance Companies - losses increase concerns

Reblogger Esko Kiuru
Services for Real Estate Pros

A vital part of the housing industry but largely forgotten during this mayhem. Richard fills us in.

Original content by Richard Byron Smith, NMLS #184479 Loan Officer, NMLS 184479

Mortgage insurance company losses are a mounting concern for the industry.

 A concern that has not received much coverage in the media, nor in Congress. These companies have taken a beating in the market downturn.

Mortgage insurance enables home buyer to purchase with less than a 20% down payment. For FHA loans, the home buyer purchases government mortgage insurance from HUD. For conventional loans, the home buyer purchases private mortgage insurance.

Several companies offer mortgage insurance. All have taken heavy losses and as a result have tightened their lending guidelines. In many cases the MI companies have tightened their guidelines more than Fannie Mae and Freddie Mac have.

In other words, Fannie or Freddie might allow a loan to be, if the borrower can obtain mortgage insurance. But if the mortgage insurance is not availabie, then the loan cannot be made. Even though Fannie and Freddie guidelines would have allowed it.

Mortgage insurance is critical to home affordability and to the housind market.

Mortgage insurance is in trouble.

Standard and Poor's is looking closely at the larger mortgage insurance companies. This look may mean a credit rating downgrade.

The impact - higher premiums, tighter guidelines, less approved loans. It may be that Congress needs to look into what can be done to support this industry that is so vital to the continued housing recovery.

In an earlier post I suggested a twist on the home buyer tax credit that might have provided a boost to the struggling mortgage insurance industry, and might have actually helped create new home buyers. Both of these issues remain unaddressed.

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Rainmaker
716,046
Pat Champion
Coldwell Banker Camelot Realty - Mount Dora, FL
Call the "CHAMPION" for all your real estate needs

I can see why this would be a concern for the home buyer today-it seems like one more thing to make the buying a home harder to obtain.

Nov 10, 2009 03:59 AM #1
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Pat,

PMI firms are hurting and that limits home buyer options.

Nov 10, 2009 07:11 AM #2
Ambassador
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Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I am pretty much telling people that it is easier to go FHA (if you qual) than put less than 20% down.  All the MI overlays and the double underwriting/appraisals are causing a lot of unresolved heartache!

Nov 15, 2009 02:51 PM #3
Anonymous
Tim Manni

"A concern that has not received much coverage in the media, nor in Congress": You've got that right! We've been pounding our fist at this topic for months now, and can't find a reason why this industry has been left unsupported (http://blog.hsh.com/?p=6575).

The only reason we can come up with is that MI companies don't fit into Washington's future plans for the mortgage industry (since they seem to be dominating the industry at this point).

We'll continue to ask this question until we get an answer. It's good to see others are paying attention to it as well.

There's a lot of people out there who believe that the FHA is the new subprime -- it may not be the "old" subprime (no/low-doc loans, etc), but the FHA is servicing below prime borrowers. Twenty percent down is a task in itself, we must allow prime borrowers to once again get financing without 20% down. Without MI, FHA will continue to grow and so will its risk.

Thanks,

Tim

Nov 17, 2009 01:17 AM #4
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Renee,

It's pretty much 20% down or go FHA if possible.

Nov 17, 2009 09:02 AM #5
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Tim,

If MI firms are being chased to the sidelines, that would alter the mortgage landscape quite a bit.

Nov 17, 2009 09:05 AM #6
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