While the private mortgage insurance industry is making a push to be included in a revised definition of a qualified residential mortgage, there is a question of how many of these companies will still be around when QRM goes into effect.
On July 29, just a day after Old Republic International Corp. revealed it might have to put its primary mortgage insurance subsidiary into run-off, Fannie Mae suspended that unit, Republic Mortgage Insurance Co., as well as the unit ORI was looking to get approved as a nationwide mortgage insurer, Republic Mortgage Insurance Co. of North Carolina. Freddie Mac took a similar action on Aug. 2.
In a Selling Guide announcement, Fannie Mae said RMIC's primary regulator, the North Carolina Department of Insurance will not extend its waiver on the company's failure to meet the state's minimum policyholder position requirements. As a result, NC DOI will not allow RMIC to write new policies in North Carolina after Sept. 1.
Both government-sponsored enterprises will not buy loans with RMIC MI that have note dates before May 1 or after Sept. 1.
According to figures compiled by NMN and the Quarterly Data Report, RMIC ranks last among all active MIs in terms of policies-in-force with a market share of about 9.6%.
Some of RMIC's competitors are not doing well either in terms of meeting the risk-to-capital standard.
PMI Group is using a contingency subsidiary to write business in two states where it could not obtain waivers of the risk-to-capital requirements. But the company's capital situation was helped recently when it gained the ability to put the note due from the sale of its Australian business on its balance sheet. However, the company recently reported its risk-to-capital ratio was 53-to-1.
Genworth Financial strengthened the reserves at its MI unit by $300 million, leading to a $253 million loss for the subsidiary. But the company said its risk-to-capital ratio is at or above 25-to-1 as well.
Meanwhile, the management at both MGIC Investment Corp. and the Radian Group took the time during their respective second-quarter conference calls to make noise about their companies benefiting from possible consolidation.
A strong point for Radian, its chief executive S.A. Ibrahim said, is that its risk-to-capital ratio fell during the quarter to 19.8-to-1 from the first quarter's 20.3-to-1.
“Our capital and liquidity position provide a competitive advantage for Radian,” he said, noting the company is looking to take advantage of possible realignments in the industry. Later he said Radian Guaranty's top priority is to write as much new business as it can and gain from the pullback by its competitors.
Teresa Bryce Bazemore, president of Radian Guaranty, said the MI's sales force is “aggressively” soliciting more business from existing customers. The company's business development team is also working to get new customers to sign up and then have them use its products.
Still, Radian and the other private mortgage insurers are still seeing the Federal Housing Administration impact their business. Ibrahim, when asked if the taking back of market share from FHA has been slower than expected, he agreed and gave two reasons.
The first has to do with the GSEs raising fees and thus reducing the advantage of a private MI execution. The second is that loan officers have to be retrained on how to do a low downpayment mortgage using private MI rather than FHA, he said.
A pair of studies, one backed by the Mortgage Insurance Cos. of America, the other by Genworth, were used to back comment letters by those entities on where private MI fits in the QRM definition. Both studies touted the performance of loans with private MI over the piggyback or 80-10-10 mortgages which ate into the industry's market share during the mid-2000s.
