Mortgage insurance defaults set monthly record
WASHINGTON – Mortgage insurers saw defaults rise to a new monthly record in November, according to data published Monday by an industry trade group.
Mortgage insurance companies such as PMI Group Inc. and MGIC Investment Corp. protect lenders from defaults on home loans, but have posted hefty losses this year and seen their shares plummet as more homeowners were unable to pay their monthly loans.
Defaults, defined as loans 60 or more days late, rose in November to more than 61,000 industrywide, up 35 percent from the same month a year earlier, according to the Mortgage Insurance Companies of America. It was the highest monthly number since May 1999, when the trade group started tracking the data.
Lenders typically require home buyers to pay mortgage insurance when they put down less than 20 percent of their home’s value. Payouts to the lenders are triggered when borrowers miss payments.
However, in recent years, borrowers had been able to avoid making mortgage insurance payments by taking “piggyback” second mortgages that cover the 20 percent down payment.
As defaults have grown, lenders are less willing to provide those second mortgages, which has meant more new business for mortgage insurance companies.
Overall applications for mortgage insurance rose to 173,259 in November, up 65 percent from 93,321 in the same month a year earlier.
“More new policies are being written,” said Jeff Lubar, a spokesman for the trade group. “These exotic loans are fading from the market.”
The trade group’s data comes from American International Group Inc., Genworth Financial Inc., Old Republic International Corp., MGIC, PMI and Triad Guaranty Inc. but excludes Radian Group Inc., which left the trade group in 2003.