Lockhart Wants TARP to Prop Up MI Firms

The government sponsored enterprises' regulator wants the Obama administration to use some of the second installment of the Troubled Asset Relief Program funds to shore up the capital bases of the private mortgage insurance companies so that Fannie Mae and Freddie Mac can finance more homebuyers. "I am hopeful that TARP II will address the private mortgage insurers' capital issues," Federal Housing Finance Agency director James Lockhart told an American Securitization Forum meeting in Las Vegas. The government-sponsored enterprises depend on PMI to serve borrowers with down payments of less than 20%. But the PMI companies have increased premiums, tightened underwriting and become less competitive as a result of default and foreclosure losses. Due to "stresses on mortgage insurance company capital," Mr. Lockhart said, the GSE market share has fallen while the market share of government-insured Federal Housing Administration/Veterans Affairs loans has increased dramatically. "The private mortgage insurers' market share versus FHA/VA fell from nearly 80% in the first quarter of 2007 to about 30% in the third quarter of 2008," the GSE regulator said.