Mortgage guaranty insurers could benefit from the expansion of loan modification programs by Congress or federal agencies, according to Curt S. Culver, chairman and CEO of mortgage insurance provider MGIC Investment Corp.
Speaking during the company's fourth-quarter conference call in which the company announced a $518.9 million net loss in 2008 – narrowed from a $1.67 billion loss taken the year before – Culver said loan modification efforts initiated thus far by the government-sponsored enterprises (GSEs), Federal Deposit Insurance Corp. and major lenders have run into a problem familiar to the company: redefault rates that hover around 50%.
If future programs move toward ‘reducing the borrower's payment, we would expect that to benefit us going forward, although we're not sure to what level,’ he said.
MGIC wrote $48.2 billion of new insurance last year, down more than 37% from the prior year, which Culver attributed to more stringent underwriting and pricing guidelines the company has implemented over the past year. While he said he believes MGIC is maintaining market share of roughly 23%, the private mortgage insurance industry as a whole has lost significant share to the Federal Housing Administration, Culver said.
Of the company's 182,000 delinquent insured mortgages, approximately 60% were on GSE loans, while 40% were part of private-label securities or portfolio loans, Culver said.
‘Out of this universe, the key is how many will actually qualify, and given that we don't have updated income information and property values, it's difficult to assess the size of the benefit to us," Culver stressed. "Additionally, if cramdown legislation is passed, it will be benefit us."
SOURCE: MGIC Investment Corp.