Released: August 14, 2008

Mortgage insurers’ losses mount

Source: Renae Merle, Washington Post (Free Registration)

Large mortgage insurers have reported $2.6 billion in losses so far this year, sparking concerns that rising foreclosure rates could force the industry into a money crunch and ultimately make the home-buying process even more difficult.

These insurers make up a critical part of the mortgage industry, taking on the risk when borrowers make small down payments. They are facing record delinquency rates that have sent them scrambling to stem losses and to improve their capital reserves. Those losses have also dinged their relationships with mortgage-financing giants Fannie Mae and Freddie Mac, which the insurers depend on for business.

The mortgage insurance industry is dominated by a half-dozen large firms that insure loans when a buyer makes a down payment of less than 20 percent of a home’s purchase price. If the borrower defaults, the insurers pay the lender a portion of the loss.

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