A major lender’s change in reporting policies helped drive a 71.2 percent annual increase in defaults reported in April by major mortgage insurance companies, but represents a "one-time adjustment" in a market that "is returning to fundamentals," an industry group said.
In a monthly report, the Mortgage Insurance Companies of America said its members reported 73,880 defaults in April, up from 43,161 a year ago and also besting the previous 12-month high of 68,950 seen in January.
The increase included previously unreported faults by an unnamed major lender, which has changed its reporting policies, MICA said.
Although the number of traditional policies issued in April was down 26.6 percent from a year ago, to 108,322, dollar volume was up 11.7 percent to $19.4 billion.
The increase in dollar volume reflects a "return to quality in the marketplace," MICA Executive Vice President Suzanne Hutchinson said in a press release.
MICA’s reports include data from AIG United Guaranty, Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp. (MGIC), PMI Mortgage Insurance Co., Republic Mortgage Insurance Co. and Triad Guaranty Insurance Corp.
Many of those companies are struggling to raise the capital they need to maintain the ratings required to continue providing private mortgage insurance for loans purchased by Fannie Mae and Freddie Mac. Mortgage insurance is usually required when borrowers make down payments of less than 20 percent.
MGIC, PMI and Radian Group Inc., which provide mortgage insurance for the majority of Fannie and Freddie loans with less than 20 percent down payments, have all seen their financial strength ratings downgraded by Standard and Poor’s to a step below the minimum "AA-" rating required by Fannie and Freddie. The companies are preparing mitigation plans detailing how they intend to restore their ratings (see story).
Triad Guaranty, which is also trying to restore its AA- rating, last week announced that Freddie Mac has suspended the company as an approved mortgage insurer, but will continue to purchase mortgage loans insured by Triad during an appeal process. Triad was scheduled to file its appeal with Freddie Mac Thursday.
What’s your opinion? Leave your comments below or send a letter to the editor.