A coming hike in Federal Housing Administration insurance premiums is expected to give private mortgage insurers a chance to regain market share from the government.
"The increase in FHA premiums will make the FHA more sound and MI [companies] and Genworth more competitive," said Genworth Mortgage Insurance vice president Chris Antonello.
On Oct. 4, FHA will cut its upfront premium by more than 50% to 100 basis points on newly originated single-family loans. At the same time, the FHA 55 bps annual premium will go up to 85 bps for mortgages with loan-to-value ratios up to and including 95%, and to 90 bps for LTVs above 95%.
FHA commissioner David Stevens claims the hike in premiums will facilitate the return of private capital to the mortgage market. "We have actually made GSE loans with private mortgage insurance a better option for some homebuyers," he told a congressional panel this week.
The GSEs Fannie Mae and Freddie Mac are required to have PMI on loans with loan-to-value ratios higher than 80%.
"For borrowers with as little as a 5% down payment, PMI is a better choice provided they have a good credit score," the Genworth vice president told National Mortgage News. "And for borrowers with a 10%-15% down payment, private mortgage insurance is an even better choice," he added.
(For more details see the Monday edition of NMN.)
