Private MIs Post Dismal First Half of 2009

Despite a sharp jump in mortgage originations during the second quarter, the private mortgage insurance industry saw its volume of new business decline during the three-month period. According to a new analysis by Inside Mortgage Finance slated to be published this week, private MI activity fell 11 percent between 1Q09 and 2Q09. Even more disturbing was the fact that first half 2009 MI volume came in a hefty 62 percent below year-ago levels. During the second quarter, United Guaranty fared the best among MIs with a 90 percent rise in business. Meanwhile, PMI fared the worst with a 60 percent drop in new MI volume in the period.

Private MIs Continued to Post Huge Losses in Early 2009

Despite some early signs of improvement in the mortgage market this year, the private mortgage insurance industry continued to be battered by rising defaults and claims in early 2009. And a recent surge in refinance activity has done little to boost private MI business. According to new numbers scheduled to be released this week by Inside Mortgage Finance, the six private MI firms still writing new business posted an aggregate $1.2 billion net loss on their U.S. mortgage insurance activities during the first quarter.

That was slightly better than the $1.4 billion loss posted in the fourth quarter of 2008, although there is little evidence of better times ahead. Even though Fannie Mae and Freddie Mac mortgage activity, which accounts for most of private MI business, jumped 98 percent in the first quarter, new MI volume rose only 5 percent. This was because most of the new Fannie/Freddie mortgages made in 1Q09 had loan-to-value ratios below 80 percent and didn’t require private MI.

MI Industry Continues to Suffer as Bailout Hopes Fade

The private mortgage insurance industry moved into dangerous territory this week as the survival of MI firms increasingly became dependent on some sort of federal bailout. Three of the MI industry’s biggest players  Radian, MGIC and PMI continued to face sagging stock prices that hovered at dangerously low levels. PMI, which just released worse than expected fourth quarter results this week, watched its share price trade around 50 cents in morning trading today.

Private MI observers contend that the industry will have a very difficult time surviving unless it gets some sort of bailout and soon. While the Obama administration is not anxious to bail out any new industries –particularly those in the insurance area– a collapse of the MI industry would force more mortgage business to FHA and could trigger huge losses at Fannie Mae and Freddie Mac.

Share of Private MI Business Sinks to New Low in 4Q08

Private mortgage insurers, battered by a combination of greatly tightened conventional mortgage underwriting standards and plummeting stock prices, watched their share of the total mortgage insurance business drop to just 22 percent in the fourth quarter, according to Inside Mortgage Finance. That was way down from the 74 percent market share seen a year earlier and was the lowest level ever recorded by Inside Mortgage Finance. Not surprisingly, FHA accounted for most of the shift away from private mortgage insurance last year. During 2008, FHA’s share of the mortgage insurance business rose from 21 percent to 69 percent.

Mortgage-Related Stocks Show Rebound in Short Week Trading

September is looking like a much kinder month for mortgage-related stocks. After taking a severe beating in August, the stock prices of most mortgage-related firms were up in the first three days of the month. Embattled Fannie Mae and Freddie Mac appear to be out of the limelight – at least for now – and that has helped push their stock prices back up to pre-August levels. Fannie was trading at $7.49 a share while Freddie was at $5.23 a share in the late morning.

But the biggest gains were being posted by private mortgage insurance firms, who have taken some of the biggest stock price hits of any company in the mortgage business this year. PMI’s stock price jumped over 20 percent this morning while MGIC’s price climbed 11 percent. Radian saw a healthy 17 percent jump in its stock price. The next big test for mortgage stocks may come as early as Friday when the Mortgage Bankers Association releases its mortgage delinquency and foreclosure numbers for the second quarter.

Genworth Becomes Top MI as Industry’s Troubles Grow

Genworth Financial, the fourth most active private mortgage insurance company a year ago, moved into first place in the second quarter of 2008, according to numbers compiled by Inside Mortgage Finance. Genworth has successfully capitalized on the woes of other MIs, who have watched their financial positions deteriorate as mortgage-related claims and losses have mounted.

While the MI industry as a whole watched its new business volume tumble a hefty 24 percent in the first six months on a year-over-year basis, Genworth posted a huge 42 percent gain in activity. Genworth wrote $14 billion in new primary MI in the second quarter – a level that amounted to one quarter of the total business written in the three-month period.