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MI Cures Outpace Defaults in February

For the first time in almost a year, mortgage insurance cures outpaced new defaults in February, a signal that residential credit quality may be improving.

The Mortgage Insurance Companies of America reported that 38,421 new defaults were reported by the association's six-member companies in February. The companies also reported 43,205 cures during the month.

That translates into a cure-to-default ratio of 112.5%, a sharp improvement from the 72.1% ratio seen in January, when defaults exceeded cures by 47,266 to 34,141.

The last time cures exceeded defaults was in March of 2004, when MICA reported 43,489 cures compared to 38,014 new defaults on primary mortgage insurance, for a cure-to-default ratio of 114.4%.

Companies that contribute to MICA's report are AIG United Guaranty, Genworth Financial, Mortgage Guaranty Insurance Corp., PMI Mortgage Insurance, Republic Mortgage Insurance Co. and Triad Guaranty Insurance Corp.

The primary insurance-in-force totaled $602.9 billion at the end of February, down by $14 billion from one year earlier. Pool insurance also declined modestly from one year earlier.

Applications for new insurance have also declined, reflecting lower mortgage lending volume as interest rates have edged up. Applications for new mortgage insurance totaled 110,384 in February, down from 140,648 in February 2004.

All told, 99,180 borrowers used private mortgage insurance to buy or refinance a home last year. That was up slightly from the month before.

Private mortgage insurance allows homebuyers to finance a home with as little as 3% down, or even less under some affordable housing programs. The dollar volume of primary insurance on newly originated single-family home loans totaled $13.8 billion in February, down 1.7% from January.

The MICA data seem to back up a quarterly survey from the Mortgage Bankers Association, which showed steady foreclosure rates and falling delinquency rates in the fourth quarter of last year. During the fourth quarter, the MBA reported that 4.23% of home loans were at least 30 days past due, down 26 basis points from one year earlier.

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