Is PMI DOA?
by Tom on August 25, 2009
in Market Musings, Uncategorized, banks
This is by no means conclusive, but it’s something to at least keep an eye on. Let me explain:
- Without mortgage insurance, Fannie and Freddie can’t go higher than an 80% loan to value.
- The PMI companies are getting hit hard with the losses they are experiencing.
- If the PMI companies continue to get hit with bad losses, they might be unable to offer mortgage insurance.
What do I expect this to mean for the housing market? A couple of things:
- Expect increasing pressure pushing more and more borrowers towards FHA.
- Expect tightening requirements for PMI loans.
- Expect increased fees on FHA’s side because of the losses they are facing and frankly because they can do it and get away with it.
PMI is not DOA, but it’s not completely healthy either and that’s going to make a difference over the next 12 to 48 months…..
Tom Vanderwell
Housing demand could snag on mortgage insurance – Mortgage Insider – OCRegister.com
Housing demand could snag on mortgage insurance
August 25th, 2009, 2:45 pm · posted by Mathew PadillaMost of the home loans in this country are sold to Fannie Mae and Freddie Mac, which insist borrowers put down 20% or more of the purchase price of a home or pay for mortgage insurance. But is there enough insurance available? Here’s the latest on that issue from National Mortgage News:
Capital constraints on mortgage insurance companies could impede the ability of Fannie Mae and Freddie Mac to keep up with the demand for mortgage financing during the housing recovery, according to a report by the government-sponsored enterprises’ regulator. Former Federal Housing Finance Agency director James Lockhart has been urging the Treasury Department to provide capital assistance for the private MIs since last November. The Mortgage Insurance Cos. of America also is seeking assistance. “We have a request pending and we are waiting for a response,” said MICA spokesman Jeff Lubar. The GSEs can purchase single-family mortgages with loan-to-value ratios higher than 80% only if the homebuyer gets mortgage insurance. The FHFA Mortgage Market Note issued a few days after Mr. Lockhart’s departure projects that the demand for such high LTV loans could hit $230 billion in 2009. The ability of the MIs to meet that level of demand is “remote,” FHFA report says. “The industry’s ability to build and maintain sufficient capital to meet the needs of the enterprises over the short term without some federal assistance or an infusion of private capital is unclear,” the report concludes.
So the answer is more government support? Let’s hope not.
Aren’t the PMI companies directly or indirectly reinsured through….AIG and their credit default swap enablers Goldman Sachs? The government is already involved with the Treasury Secretary keeping his alma mater solvent.
Think of it as Uncle Sam as a triple net landlord with the right to inspect your light bulbs.