Insurance News

U.S. insured mortgage defaults fall to 6-month low

Posted on: June 5, 2009

NEW YORK (Reuters) – Defaults on privately insured U.S. mortgages fell to a six-month low in April, providing evidence that deterioration in the nation’s housing market may be slowing.

A trade group, Mortgage Insurance Companies of America, on Friday said 81,171 insured borrowers were at least 60 days late on payments, often a precursor to foreclosure, in April. That is down 3 percent from March and down 24 percent from a record 106,482 in January. Defaults rose 10 percent from April 2008.

Prodded by politicians and regulators, most of the biggest U.S. home loan providers have adopted mortgage modification programs in the last year to keep borrowers out of foreclosure. It is often less costly for lenders to work out payment terms with borrowers able to pay at least some of their debts.

“Decreased default numbers are significant,” said Howard Glaser, president of Glaser Group, a mortgage consultant in Washington, D.C. “It is tangible evidence that the combination of more aggressive modification plans and historically low refinancing rates are letting people stay in their homes.”

On the other hand, mortgages brought up to date fell 16 percent to 58,587 in April from 69,931 in March, when several big lenders ended moratoriums on foreclosure sales. So-called insurance cures nevertheless rose 48 percent from April 2008.

Private mortgage insurance lets people buy homes with down payments of less than 20 percent, and guarantees that lenders will be repaid even if borrowers default. Insurance in force totaled $932 billion in April, according to MICA.

Falling home prices have left many borrowers with negative equity. Prices of single-family homes fell 19.1 percent in the first quarter, according to the S&P/Case-Shiller Home Price Indices, the biggest drop in that survey’s 21-year history.

About 12 percent of U.S. households with mortgages ended the first quarter either late on payments or in foreclosure, the Mortgage Bankers Association said.

MICA compiles data from American International Group Inc’s (AIG.N: Quote, Profile, Research, Stock Buzz) United Guaranty Corp, Genworth Financial Inc (GNW.N: Quote, Profile, Research, Stock Buzz), MGIC Investment Corp (MTG.N: Quote, Profile, Research, Stock Buzz), Old Republic International Corp (ORI.N: Quote, Profile, Research, Stock Buzz), PMI Group Inc (PMI.N: Quote, Profile, Research, Stock Buzz) and Radian Group Inc (RDN.N: Quote, Profile, Research, Stock Buzz).

Year-earlier data also included Triad Guaranty Inc (TGIC.O: Quote, Profile, Research, Stock Buzz) but not Radian.

Like mortgage providers, which now often require 20 percent down payments, private mortgage insurers have been tightening their standards.

The industry has struggled with losses from having backed subprime and other risky mortgages, which have eaten into capital.

“New business is pristine in terms of credit quality,” Glaser said. “The problem for mortgage insurers is whether they will have the capital to write the good new business.”

(Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; editing by John Wallace)

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