AIG Mortgage Insurer Seeks to Grab FHA Business Amid Shutdown

American International Group Inc.’s mortgage insurer, whose biggest rival is a U.S. agency, is wooing borrowers with the prospect that they’ll avoid delays tied to the partial government shutdown.

AIG’s United Guaranty has sent a message to clients highlighting the company’s willingness to accept paperwork that had been prepared for the Federal Housing Administration. Mortgage insurance covers losses when homeowners default and foreclosures fail to recoup costs.

“In light of the federal shutdown and the inability of FHA to do business as usual, United Guaranty is reminding our customers that we are a resource,” Jo Fleischer, a spokesman for the unit of New York-based AIG, said in an email today. “We can underwrite any FHA submission with existing full documentation, and typically get our customer a decision within 24 hours.”

AIG, MGIC Investment Corp. and Radian Group Inc. are targeting share gains as the housing market recovers from the deepest crash since the Great Depression. United Guaranty, led by CEO Donna DeMaio, was the No. 2 private mortgage insurer in the first half of this year, backing $27.3 billion of loans, and trailing Radian according to data compiled by Inside Mortgage Finance. The FHA insured $134.8 billion.

Radian will also accept FHA forms and seeks to make coverage decisions within 24 hours, said Emily Riley, a spokeswoman for the Philadelphia-based company. MGIC’s Michael Zimmerman said the Milwaukee-based insurer is also prepared for clients who sought FHA coverage.

“If it’s fully documented and meets our requirements, we will insure it,” Zimmerman said.

United Guaranty also said in its announcement last week that, with FHA’s request of U.S. funds to subsidize capital requirements, “we understand there is some confusion about FHA’s continued ability to do business as usual.”

AIG took a U.S. bailout that began in 2008 and swelled to $182.3 billion. The company, which also sells property-casualty coverage and life insurance, repaid the aid last year.

The U.S. is in the second week of a partial shutdown of the federal government amid disagreements between Democrats and Republicans over spending. Furloughs of FHA workers could lead to processing delays for some home loans, the Department of Housing and Urban Development said in its contingency plan for a shutdown.

“FHA will have limited staff during a shutdown,” according to the document. “The longer the shutdown, the more serious the impact will be.” Melanie Roussell, a spokeswoman for HUD, declined to comment.

The U.S. is reducing the FHA’s role, which expanded amid the financial crisis. The FHA backed 41% of insured loans in the second quarter of this year, down from 71% in 2009, after raising the fee it charges for the coverage. The agency’s share was less than 20% from 2005 to 2007.

Private mortgage insurers have been easing underwriting standards as home prices rise. The requirements have become more similar to those of government-backed loan buyers Fannie Mae and Freddie Mac.

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