Private Mortgage Insurance Comeback?

Everyone in the FHA business knows that Monday is a big day. FHA will lower its upfront mortgage insurance premium (except for HECM’s) while simultaneously increasing the annual premium, which is collected on a monthly basis. This change will affect purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit-qualifying streamlined refinance loans. Here’s the details.

Private mortgage insurers have been licking their chops for Monday. They have grappled with credit losses on policies, claims of bad policy rescission, and an inability to compete with FHA’s prices on new insurance. So with the increase on Monday could come the restoration of competitiveness of private insurance, potentially letting the companies win back market share and rebuild their reserves. And anyone watching that business has seen MI companies increasing riskier loans in somewhat subtle ways. Most believe that the MI companies, as a whole, are still fairly well capitalized. And of course lenders undoubtedly will benefit from the better prices, service and product diversity after Monday’s FHA premium changes.