FHFA Wants TARP Money Used to Help MI Industry

Washington-The nation's GSE regulator wants the Obama administration to use a portion of TARP funds to shore up the capital bases of the six surviving private mortgage insurance companies.

"I am very hopeful we can get some funding for them," Federal Housing Finance Agency director James Lockhart told reporters. He said it is critical to get the PMI companies "back in the game."

Fannie Mae's and Freddie Mac's ability to finance homebuyers is hampered by higher premiums the PMI companies are charging on low-downpayment mortgages. The MIs also have tightened their underwriting guidelines as a result of default and foreclosure losses.

Moody's Investors Service recently downgraded its ratings of the financial strength of six PMI companies citing higher mortgage loss expectations and stresses on the insurers' risk adjusted capital ratios. Moody's analysts noted, however, that the U.S. government is pursuing initiatives to reduce foreclosure, which could reduce claims. They also noted the "possibility" of the PMI companies gaining access to government capital in a program similar to the capital infusions that hundreds of banks have received under TARP.

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