The Housing Market Gets a Vote of Confidence

The Housing Market Gets a Vote of Confidence....from Mortgage Insurers

After months of Federal tax credits and over a trillion dollars of mortgage-backed securities purchases by the Fed, encouraging signs of increased liquidity from entities outside of the Federal government are starting to become more readily available via the mortgage insurance market.

Over the past two years, delinquencies, which in many cases lead to eventual foreclosure, had plagued so many of these private insurers that they were forced to shut their doors. Now, a resurgence of capital is being infused into many of the survivors, leading many in the market to believe that there is a renewed sense of confidence in the mortgage market, particularly with regards to residential mortgages originated in excess of the 80% LTV threshold that these insurers support. Over $2 billion of investor dollars have been injected into various mortgage insurers, many of them start-up firms, and now they stand ready to underwrite and insure.

Case in point, MGIC, one of the last giants standing from the market collapse, raised over $1 billion in fresh capital in the last 60 days; a combination of stock and debt. The PMI Group raised over $700 million dollars in new funding as well; also a combination of debt and equity. Mortgage Assurance Corp, a start-up from Wisconsin, just got its licensing from its state regulator. In addition, Radian Corp, another start-up mortgage insurer, raised $500 million for its operations from a variety of investors which included a private equity firm (Pine Brook Partners), JP Morgan Chase, and investment banking powerhouse Goldman Sachs. As of today they are very close to being licensed in all of the 50 states. Moreover, the stocks for both MGIC and PMI Group are up over the last two months, which in itself is another vote of confidence in the mortgage market. Given that the FHA is now raising its MI premiums and tightening its underwriting criteria (due its record losses and current liquidity issues), a resurrection in the involvement of private mortgage insurers is just what our industry needs to continue our recovery.

The private mortgage insurance market looks to be making a comeback. Given that the FHA, Fannie Mae, and Freddie Mac are all hemorrhaging and incurring massive losses, it can't come at a moment too soon; particularly since the Fed is no longer purchasing mortgage-backed securities to artificially keep rates low. As the private market continues to inject fresh capital into the various entities that facilitate the life blood of the mortgage industry, the financing marketplace should continue its steady pace to a full recovery. The outside investor confidence in the mortgage industry will do wonders to lift up our industry as the Federal government pulls back and winds down its programs. One can only hope that all of this fresh capital doesn't lead to another round of over aggressive lending........remember 100% no-doc?