A follow-up to "Fannie, Freddie Warn on More Losses ($400 Billion!?) FRE; FNM"
From the Orange County Register:
I haven’t seen much written lately about the state of mortgage insurance companies, the firms that provide lenders protection against loss when borrowers put down less than 20% to buy a home.
So I noted with interest a news brief on National Mortgage News that reported on Freddie Mac saying in a public filing if the insurance industry collapsed it could face losses of up to $63.4 billion. Over the past nine months Freddie Mac has received $658 million from such firms.
A little background: the fear is that insurance companies issued policies during the housing bubble on properties that have lost a significant amount of their value. Here’s more on Freddie Mac, which is now controlled by the federal government:
Eight different MI firms have written policies on Freddie Mac loans with MGIC and Radian being the two largest in terms of outstanding coverage, $15.5 billion and $12.1 billion, respectively. Despite the shaky state of the housing market not one MI has failed, though one company, Triad Guaranty, is in self-liquidation mode. In a filing with the Securities and Exchange Commission, Freddie notes that it has “institutional credit risk” relating to “the potential insolvency or nonperformance of mortgage insurers” that cover its loans. But the GSE also says that based on “currently available information” it expects that all of its MI counterparties will continue to pay claims even though many have received “credit watch negative” ratings. The $63.4 billion figure represents the “remaining aggregate contractual limit for reimbursement of losses” of principal, Freddie says.
Let’s hope the mortgage insurance industry survives without taxpayer assistance.