MIs' Troubles May Get Worse

The mortgage insurance industry's troubles are not over, and they may get worse before they improve, according to Fitch Ratings. In a special report on mortgage insurer delinquencies, the rating agency says the rapid growth for key mortgage insurers last year will cause the 2007 vintage to account for growing losses in 2008 and 2009 that will stress their balance sheets. "The mortgage insurance industry underestimated both the scope and severity of the decline in residential mortgage markets that became increasingly acute in 2007," Fitch said. "Initial industry optimism over increased demand and better premiums in early 2007 reversed over the second half of the year, and by the early fourth quarter the industry was significantly tightening underwriting guidelines to limit damage from ongoing poor mortgage origination standards and the prospect of substantial and widespread housing price declines."