More Action on the Mortgage Insurance Frontby Tim Manni
Perhaps the words “more action” are slightly overstated; maybe the words “more interest” would be better suited to describe the recent occurrences in the mortgage insurance (MI) market.
Last Friday we wrote a post titled “Resurrection of MI Could Lead to Easier Credit” — if you need a brief history lesson on the downfall of mortgage insurance, this is the article to read. The theme for that post was that ‘if the mortgage insurance market continues to attract private capital (private investors), it may soon become easier for borrowers to attain a home loan.’
An article by Paul Muolo in the latest issue of National Mortgage News titled “Genworth Adds ‘Risky’ Products,” further bolsters “Resurrection’s” over-arching theme. Muolo writes that Genworth Financial, typically a very conservative MI firm, has begun to do what no other MI firm has done by “sticking its toe back into the water on two somewhat risky product types: second homes and cash-out refinancings.”
Tom Taggart, a spokesman for the MI firm The PMI Group, said that while his firm isn’t currently offering those products, if capital becomes more available, “…we might change this policy.” In the least, Taggart’s comments suggest that MIs aren’t completely turned off from these investments as they once were.
Why would a typically conservative company begin to invest in two of the more riskier products in the marketplace? Genworth’s Senior Vice President Rohit Gupta says his firm is comfortable with the risk, and that “We’re seeing signs of stability in the market and that’s what we’ve been waiting for.”
From an analyst’s perspective, real estate prices are especially cheap these days, and if Genworth follows through on their claim that the policies will be “vigorously underwritten,” it may turn into a smart move. For the Americans who can afford it, now is a great time to buy a second home.
Within a week’s time, we’ve seen increased and confirmed interest in a sector of the finance industry that was sidelined for several reasons. The more MI firms begin to test the market’s waters, the greater chance we’ll have of seeing the return of a normal functioning market.