Sandler O'Neill on Monday reduced its price target on Genworth Financial to $13 a share (from $15), citing problems with the company's mortgage insurance division.
The investment banking firm said the company's MI unit continues "to face significant headwinds as the housing market problems persist." It adds that "Once the bottom is reached for housing and if GSE reforms are enacted, the U.S. MI business may turn the corner in 2H11."
Among MI companies, Genworth ranks fifth nationwide with $111 billion of policies-in-force at yearend, according to figures compiled by National Mortgage News and the Quarterly Data Report. (Sandler has a 'hold' rating on the stock.)
Traditionally, Genworth has been one of the more conservative of the nation's seven MI firms. It reports first quarter earnings in early May.
Late last week Genworth senior vice president Kevin Schneider testified on Capitol Hill, arguing that if MI coverage is not recognized in writing a 'qualified residential mortgage' test the Federal Housing Administration will be overwhelmed with new business with taxpayers bearing "100 percent of the risk for all low-downpayment loans."
Under the current regulatory proposal, no credence is given to MI when defining a QRM.
