Private Mortgage Insurers Recovering

The private mortgage industry was severely affected by the crash of the housing market in 2006 and ever since private mortgage insurers have been losing money in real estate. But things have started to look better recently, with private mortgage insurers finally posting a profit after six long years.

The upturn in fortunes of private mortgage insurers is due to more business being afforded to them, with the Federal Housing Administration (FDA) pulling back. Low mortgage delinquencies have also played a part in the comeback of private mortgage insurers.

When the real estate market crashed in 2006, the Federal Housing Administration stepped in and took 80 percent of the market, which meant little or no business available to private mortgage insurers. But with the market stabilizing in recent years, there has been a concentrated effort by the Federal Housing Administration to ensure private capital makes a comeback in the real estate market.

Up till now, almost $49 billion dollars have been invested in new business by private mortgage insurers. This has seen a 27 percent increase since the start of the year. The upturn in fortunes for private mortgage insurers has been backed by the Federal Housing Administration relinquishing its role in the real estate market, while the reduced delinquencies have allowed many companies to establish a stable foothold in the market.

Numerous programs by the government, such as the Home Affordable Modification Program and the refinance program for underwater borrowers have bailed out private mortgage insurers and stabilized the market as well. The programs have been designed to allow people borrowing money to make easy monthly payments, as well as staying on their current loans.

But not all the programs are like a walk in the park, as the Home Affordable Modification Program has met with criticism for having a high default rate, by the inspector general of the Troubled Asset Relief Program.

There is unanimous belief that these programs have been the route back to recovery for private mortgage insurers, since without these government programs and measures, most of the people would have filed for foreclosure or become delinquent.

The future for the real estate and housing industry looks quite good as well, with Congress unveiling plans to include new measures and proposals which will help private mortgage insurers by including risk-sharing on securities which are mortgage-backed. This will prove to be a helpful tool for private insurers, since it will add to their role of traditionally backing individual mortgages.

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