MGIC Lowers Premiums to Take on FHA

MGIC Investment Corp., the nation's largest mortgage insurer, is cutting premiums to better compete with the Federal Housing Administration. In a new filing with the Securities and Exchange Commission, the Milwaukee insurer said that beginning May 1 it will offer lower rates for borrowers with credit scores of 720 or greater, and higher rates for borrowers with credit scores between 620 and 679. There will be no change in rates for borrowers with scores between 680 and 719, MGIC said. Previously, MGIC did not include a borrower's credit score in its pricing model. Lenders that find the transition difficult have the option of continuing to use the insurer's old rate structure, MGIC said. Since the housing bubble burst, the FHA has become a more formidable contender in the mortgage insurance business, gaining market share in the coverage of loans with small downpayments as private insurers tightened their underwriting standards. In fact, MGIC said in the filing that it did not consider the FHA a significant competitor until 2008. Over the past few months — in an effort to improve the quality of its loans and protect its reserve fund — FHA has hiked downpayments for borrowers with lower credit scores and raised its upfront mortgage insurance premium.