MI Companies Need More Capital, KBW Report Says

The nation's remaining private mortgage insurance companies will need at least $4 billion of new capital to maintain a 15-to-1 risk capital level, according to a new white paper from Keefe, Bruyette & Woods. This total — which could grow to $6.6 billion if cumulative losses are 10% worse than analysts' projections — does not take into account needing additional capital for increasing the amount of business being written. "In the event the government decided to inject capital into the MI industry, the level would likely need to be above what we have in our matrix, because the government's goal would not just be industry stabilization from a loss perspective, but industry utilization as a method for helping more borrowers either refinance or purchase new homes," the report says. KBW analysts Nathaniel Otis and William Clark added that if the GSEs continue to operate in the future as they do now, mortgage insurers would not become obsolete. But they note: "there is also the possibility that the future structure of the GSEs will be completely different than exists today, which could threaten the need for a private mortgage insurance industry," KBW says.