MILWAUKEE — As the housing market crumbles, homeowners are worried about mortgage payments and sellers are worried about slumping prices – but the companies that insure their loans are worrying about their very survival in the face of billions of dollars in claims.
Insurers such as industry leader MGIC Investment Corp. are predicting they won’t turn a profit for at least a year. The uncertainty is sending stocks down and raising questions about what happens if loans go bad and the insurers behind them are out of business.
In the interim, though, regulators and analysts say they aren’t concerned about the biggest insurers staying in business.
“We’re not worried about it today. You can ask us tomorrow. It may change. But right now, it’s not a high priority,” said Gail Madziar, spokeswoman for the Michigan Bankers Association.
Bankers know that insurers have cash reserves, often a threshold set by the individual states, and find mortgage insurance to be the least of their worries now, she said. Instead, they just want to make sure they’re giving loans to people who can afford them, Madziar added.
Most mortgage lenders typically require mortgage insurance when buyers put down less than 20 percent of their home’s value.
If the insurers do run into trouble, the risks for the industry are huge. About 10 percent of the total loan market has private mortgage insurance, according to the Mortgage Insurance Companies of America. There was $776 billion in private mortgage insurance in force as of September, the trade group reported.
