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October 11, 2008 11:33:56 AM CDT

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Mortgage Insurers Feel Pinch, Pull Back on Loans

Posted Jul 15, 08 9:51 AM CDT in Business 

(Newser) – Mortgage insurers facing mounting defaults are tightening their standards, adding another hurdle for potential homebuyers, the Wall Street Journal reports. Beleaguered and risk-averse banks are making more mortgage applicants apply for insurance, just as insurers are declaring more parts of the country “declining markets.” making insurance harder to obtain. The result is “wreaking havoc” on the industry, one bank representative tells the Wall Street Journal.

Loan defaults coupled with slipping credit ratings have forced insurers to be more prudent—"Clearly, the pendulum had swung a little too far in terms of flexibility in underwriting," says one risk officer—such as requiring 10% down payments, compared with 3%-5% previously. And premium prices are rising. Some brokers have turned to the Federal Housing Administration’s more lenient loan programs, but the FHA also started charging higher premiums for the first time on July 1.

Source Wall Street Journal

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Treasury Secretary Henry Paulson and the Bush administration hammered out a process to save Fannie Mae and Freddie Mac over the weekend, hoping to ease fears in the market.   (AP Photo/Manuel Balce Ceneta)
A bank owned home is seen for sale in Sacramento, Calif., Wednesday, July 2, 2008.   (AP Photo/Rich Pedroncelli)
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Thursday, July 10, 2008, before a hearing on systemic risk and the financial markets.   (AP Photo/Manuel Balce Ceneta)
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housing crisis  • foreclosure  • subprime mortgage crisis  • home loans  • Federal Housing Administration  • mortgage lender  • mortgage defaults



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