Fitch Remains Bearish on MIs for 2010

Fitch Ratings, New York, is maintaining its negative outlook for the private mortgage insurance business in 2010. It expects a high number of prime credit mortgage delinquencies, coupled with home prices unlikely to rebound any time soon, which will lead to elevated default and loss rates for the industry. The MIs have been benefiting from rescissions but Fitch does not expect that to continue, as prime loans will form a greater percentage of overall delinquencies. The longer term outlook for the mortgage insurance business is uncertain as it is likely to be tied to the ultimate future form of Fannie Mae and Freddie Mac and whether the secondary market will continue to have a need for private mortgage insurance. "The importance of housing to the U.S. economy, however, suggests a future that includes a role for private capital in the mitigation of mortgage losses to the GSEs. While 2008 and 2009 saw an increasing use of FHA-insured loans, the FHA has been insuring much of the business that no longer qualified under tightened private MI guidelines. However, the FHA has recently fallen below its mandated minimum capital level and its ability to provide additional insurance at historically high levels may be limited," the report from Fitch said.