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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Richard Smith |
American Acceptance Mortgage, Inc |
FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation
Home financing in Tennessee and Georgia.
Mmmm. I wonder if MI carriers are repo'd by AIG????
If not, they will probably be looking for some TARP money if there's any left.
This is, indeed, the monster coming over the hill.
Then, there's FHA, VA, USDA, . . . . .
we have been unable to acquire mi on conventional loans for quite awhile, even on owner occupied.
we've learned to live with the govies.
i hope you're not suggesting more givaways.
we have turned into the United Socialist States of America.
Richard, I know the mortgage insurance companies are becoming concerned. Case on point: Someone I know has been trying for over 6 months for the Making Home Affordable loan modification program. Haven't gotten anywhere except one heck of a runaround. Last week this someone received a letter from MGIC asking if they could be of any help.
Lenn,
Speaking of AIG, our national insurance company.
It way very well be that the only available source fro over 80% loan to value will be government loans. I agree, it is harder and harder to get above 80% on a conventional loan.
Jay,
I think the tax credit alternative in this post would have helped the MI companies, created more new buyers, and cost the Treasury less.
Kris,
MGIC has been hit hard. Good luck to your friend. Government numbers suggest the MHA program is successful, but I doubt those numbers.
Paul,
Between agencies, lender, investors, and MI companies, we sure have a lot fewer potential clients to worry about. :(
Richard
What is interesting is that PMI and mip were basically "missing in action" between 2002-2007 ! Most first time buyers we dealt with were using 80/20 loans to close !
Are MI compaines eating the losses on these loans? I was under the impression that the banks were. Seeing as neither is in that much haste or concern to dispose of the properties in a timely manner and limit their losses, I can't say I feel for them too much. It takes a big wave to clean the beach.
Interesting information. Thanks.
Richard,
I want to be in whatever Lenn Harley's investing in; she's the brightest Rainer IMHO.
Mike in Tucson
Americans have short memories sometimes. Those who think that we are coming out of the Great Recession, didn't understand how devasting the financial industries meltdown took it's toll across the board. We aren't out of the woods yet.
Mike,
Lenn is right up there with you.
Richard
Please correct me if I am wrong. But, isn't the insurance just another arm of the bank that sold you the mortgage? Is there a MET Life, Prudential, AIG, of mortgage insurance?
Great info and I never gave it much thought that PMI is getting crushed...just another opportunity to over come in this current Market...Congrats on feature.
You are right Richard, the MI companies have been tightening guidelines due to losses for a couple of years now. The company PMI actually stopped insuring loans originated by mortgage brokers about a year ago. (+/-) It is tougher and tougher to get a conventional loan with MI.
Lots of good information. Thank you. Something most have never thought about.
Lots of good information. Thank you. Something most have never thought about.
Lots of good information. Thank you. Something most have never thought about.
Lots of good information. Thank you. Something most have never thought about.
I agree and much of what we are seeing out here is FHA or even USDA.
Richard, this is an issue which is not getting much press right now, but it is critical to the welfare of our industry. Another example of the fall-out caused by greed and carelessness that we're all paying for in one fashion or another. Thank you for posting on this.
I think congress has done enough...it is time to let the market settle itself.
Richard,
Imagine that the PMI firms would be healthy right now. Buyers with 5 to 10% down would add significant boost to demand. Looks like the government forgot how important PMI providers truly are to the housing industry. I'll reblog this.
Isn't this what AIG was forced into buying? An why they failed?
Esko and Tim,
Thanks for the reblog
Richard