Mortgage Insurers Report Monthly Jump In Mortgage Defaults
May 30 2008 - Home loans reported as delinquent to a mortgage insurer trade group surged in April, when a major home lender tightened up its policy for reporting past-due mortgages.
The Mortgage Insurance Companies of America said Friday that primary mortgage defaults surged to 73,880 in April from 58,313 in the previous month, largely because of one lender that has changed the way it reports such defaults. The organization also reported that primary mortgage cures, or loans that were delinquent but are now current, dropped from 50,585 in March to 39,584 in April. The new figures reverse a favorable year-to-date trend in both categories.
MICA spokesman Jeff Lubar said that most of the lenders that voluntarily report this data to the mortgage insurer group define defaults as loans that are 60 days or more overdue. One major lender changed its reporting standard from 90 days overdue to conform to the 60-day standard that is the general rule.
Lubar said he could not name the lender except to call it “major,” and a press release attributed the monthly jump in reported delinquencies primarily to the change from this one lender, suggesting the lender is one of the nation’s largest.
“While the change in reporting methodology by a major lender has resulted in an increase in reported delinquencies, it is important to note that this is a one-time adjustment,” Suzanne C. Hutchinson, MICA’s executive vice president, said in a press release. “Overall, the market is returning to fundamentals.”
In the first quarter, major home lenders generally reported rising delinquencies in their mortgage loan portfolios. In April, Countrywide Financial Corp. (CFC), the largest home lender, reported worsening trends and expectations for delinquencies and defaults in its mortgage portfolio. Countrywide did not return a phone call asking about its policy for reporting delinquencies.
The continuing housing market crisis has increased demand for mortgage insurance. In April, the face amount of primary mortgage insurance in force rose to $855.7 billion, marking more than a year of steadily rising insurance in force.
But the still-weak housing market is producing fewer new policies. In April, new applications dropped 19.9% to 128,243 from 160,139 new applications in March.
MICA consists of the major mortgage insurers, which are United Guaranty, a unit of American International Group; Genworth Mortgage Insurance Corp., a unit of Genworth Financial; Mortgage Guaranty Insurance Corp.; PMI Mortgage Insurance Co., a unit of PMI Group; Republic Mortgage Insurance Co., a unit of Old Republic Corp.; and Triad Guaranty Insurance Corp.