Even as personal mortgage insurers had their best quarter to date, with four of the six active insurers taking out over $ 30 billion in new insurance, they face some obstacles.
Because these companies are highly dependent on compliant mortgage credit enhancement, they are grappling with the vagueness of election results that would determine the future of government-sponsored corporate reform.
Overall, however, the real estate market will be a priority regardless of which candidate ends up in the White House, wrote Randy Binner, an analyst at B. Riley Securities, in his reports on MGIC, Radian and National MI.
"A Biden win would likely mean the status quo of the GSE reform," said Binner. "Fannie and Freddie are MI users for risk management and capital relief. Another Trump term would likely result in a smaller GSE footprint, but the GSEs would likely still need the private capital that MIs provide. We're seeing support for that Real estate market and low interest rates (mortgage rates) as a priority for both administrations. "
The other overhang with private mortgage insurers is coronavirus-affected borrowers who have missed payments. Even when a mortgage is lenient, defaulted loans are reported by service providers to mortgage insurers for inclusion in their criminal loan portfolio.
While these inventory levels remain high compared to the post-housing crisis, more loans have been healed than new defaults.
The main concern of the sector therefore remains capital adequacy under the licensing requirements for private mortgage insurers, said Binner. All three companies it follows have been well studied in B. Riley Securities' capital adequacy analysis. "Also, the flattening of forbearance and crime trends and the increased clarity around the FEMA forbearance haircut also mean that the MIs have a strong capital position," he added.
In the following, NMN reviews the mortgage insurers' third quarter results in this area.