Mortgage Insurance Companies Prosper

We’re a Florida home mortgage brokerage. Our job is to assist hopeful buyers with questions they have pertaining to any aspect of this important process. Stock advice or information is rarely mentioned across this website.

However, recent insight into the mortgage insurance business sheds light on the housing market in general. So let’s get into it …

Burgeoning Florida home mortgage insurance world

These companies - that provide lenders and their secondary market investors with a hefty degree of comfort on low-down-payment Florida home loans - are rising out of trying times. Contrary to the cycle that generated the greatest housing and mortgage boom in history, mortgage insurers such as MGIC Investments, PMI Group, Radian Group, and Triad Guaranty didn’t fare so well over the past few years.

One of the main culprits behind the divergence was the proliferation of piggyback Florida home mortgages being pushed by lenders. In periods of low interest rates, the spread between first and second mortgage interest rates diminishes to a point where it’s actually cheaper for a borrower with less equity to have a first and a second mortgage, as opposed to the standard first with mortgage insurance.

Because lenders make more money with the piggyback loan, they tend to encourage customers to take a first and a second mortgage over the more traditional mortgage insurance approach.

Another factor that hampered the mortgage insurance industry had to do the rapid appreciation in home values. This allowed a number of borrowers to cancel mortgage insurance once they reached their lender’s loan/value target. (Mortgage insurance is required when the loan/value ratio exceeds 80 percent; borrowers can petition to cancel the insurance, and the monthly fee, when the increased equity satisfies the lender’s requirements.)

Shift in the housing market

Things are now changing in favor of the mortgage insurance industry. Higher rates mean fewer piggyback loans. Declining home values at a time when borrowers are turning in their adjustable Florida mortgages expands their market.

Higher rates also equte to less Florida home loan refinancing, which keeps the existing book of business from running off.

Mortgage insurers have gone international with a fair degree of initial success, as well. Australia has written mortgage insurance for the past few years, and it appears that the concept is gaining acceptance in Western Europe and Hong Kong.

While these facts may have no interest to future buyers, what they reflect about the Florida housing market in general is worth taking note of.