Why the Mortgage Market is Still Struggling…..
by Tom on July 16, 2009
in Market Musings, Videos, mortgage insurance; pmi
This is just another sign of the fact that the housing and mortgage market are still struggling. MGIC, one of the main PMI companies, is stopping writing new PMI deal. Why?
- As property values have been dropping, they are losing too much money on houses that are getting taken back.
- The premiums coming in are not enough to overcome those increasing losses.
So what does this mean going forward? A couple of potential things:
- Tighter underwriting requirements for deals that are not FHA and have less than 20% down.
- Increasing costs for PMI going forward.
It ain’t over yet……
Tom Vanderwell
Mortgage Insurer Halts New Business; Posts Steep Loss – Earnings * US * News * Story – CNBC.com
Mortgage insurer MGIC Investment reported a wider quarterly loss and said it will stop writing new business as losses mount in the battered housing sector, sending its shares down 14 percent in premarket trade.The largest U.S. mortgage insurer [MTG 4.4701 0.5301 (+13.45%) ] said it will wind down its business and try to capitalize a fresh enterprise that would write new loans beginning next year.
It said it hopes to win a capital investment from the U.S. Treasury but “cannot predict whether we will be successful in obtaining capital from any external source.”
MGIC aims to begin to capitalize the new company with $500 million by the end of July and intends to have the new business, Mortgage Indemnity Corp, replace MGIC.
