Another Example of Why It’s Going to Get Harder to Get a Mortgage
by Tom on December 26, 2009
in Market Musings, banks
A couple of points to make about this article:
- The PMI companies are experiencing continued and increasing losses on their existing “book of business.”
- The portion of their “pipeline” that was previously thought to be low risk is seeing greater and greater losses.
- That is lowering their credit risk ratings.
So what does that mean for the housing market?
- The financial markets are expecting additional and increasing losses from the mortgage market.
- As we see losses increasing, we’re going to see greater pressure to avoid the type of loans that are causing the losses.
- Until we start seeing a “group” of loans that have been done under the more recent “restrictive” guidelines that actually perform better than expected, we’re going to see added pressure to tighten restrictions on PMI deals.
The long and short of it is this: Until we see a turn around in the jobs market and the housing market, we’re going to continue heading down a path where the only people who are going to be able to do less than 20% down on conventional loans are people with very high credit scores, very low debt ratios and pretty hefty cash reserves.
That’s my opinion, but it’s another sign of the direction things are going in the mortgage world.
Tom Vanderwell
S&P Downgrades Five Mortgage Insurers : HousingWire || financial news for the mortgage market
Standard & Poor’s downgrade the credit ratings on five mortgage insurance companies. The credit ratings agency said continued losses on insurance claims exceeded previous expectations, as low-risk books of business are starting to experience greater losses.“The lower-risk books of business within the mortgage sector (such as those with higher FICO scores or lower loan-to-value ratios) have been and will be more adversely affected than we had anticipated and U.S. mortgage insurers’ losses will continue to be greater than previously expected overall,” S&P analyst Ron Joas wrote.
The ratings agency assigned a negative outlook on the sector based on the potential for additional increased losses.
“If the US economy were to experience another setback, prolonging the exit from the recession, delinquencies and resulting losses could increase at an even greater rate, with lower benefits available from rescissions than what has been seen over the past year,” Joas wrote.
He added, “In addition, any existing and potential benefits from modification programs might reverse, and modification attempts might be ineffectual.”
The mortgage insurers downgraded are:
Genworth (GNW: 11.90 +1.02%): From triple-B plus to triple-B minus
PMI Group (PMI: 2.67 +11.72%): from double-B minus to B plus
Radian Group (RDN: 7.55 +6.34%): from double-B minus to B plus
Republic Mortgage Insurance Co.: From A minus to triple-B minus
United Guaranty : From triple-B plus to triple-B
Technorati Tags: Mortgage Insurance, PMI, Mortgages
