Tougher standards for mortgage insurers could give newcomers an edge

Some private mortgage insurers who have been regaining market share lost to the Federal Housing Administration during the downturn could soon be forced to implement price increases in order to meet risk-based standards proposed by Fannie Mae and Freddie Mac’s federal regulator. Those price increases would not only make the companies less competitive with FHA, but private companies that are relative newcomers in the space, National Mortgage News reports.

Homebuyers taking out mortgages guaranteed by Fannie or Freddie are required to buy private mortgage insurance if they are making down payments of less than 20 percent. The Federal Housing Finance Agency proposes conducting risk-based evaluations of private mortgage insurers’ portfolios, to make sure that each has enough capital to pay claims “under a scenario of significant market stress.”

Established companies like MGIC and Radian say that if adopted as proposed, the new rules will force them to raise premiums or concentrate on serving borrowers at the high end of the credit score spectrum. Newcomers Essent and National MI, which insure fewer risky loans, support the standards as proposed. Source: nationalmortgagenews.com.


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