Fitch Downgrades PMI Industry Outlook

Fitch Ratings has revised its rating outlook for the U.S. private mortgage insurance industry from Stable to Negative.The negative outlook "largely relates to several systemic concerns that are challenging the industry's operating fundamentals," the rating agency said in its review-and-outlook report on PMI. "These include the continuation of severe competition from within and outside the industry, resulting in the proliferation of various risk-sharing arrangements; the industry's increasing involvement in the subprime market, primarily through the bulk channel; and likely adverse selection related to increased levels of 'piggyback' loans, which may increase insurers' natural default rate on prime business." Fitch said it generally defines a negative industry outlook as the expectation that rating downgrades will exceed upgrades over 12-18 months and that the downgrades will be "material to the rated universe." But because of the small number of PMI companies (eight), the definition was expanded to include expected changes in insurers' rating outlooks, the rating agency said. Fitch can be found online at http://www.fitchratings.com.