The reduction in premiums on loans insured by the Federal Housing Administration was not what private mortgage insurers had hoped for — as evidenced by their share prices.
The Department of Housing and Urban Development’s annual report to Congress in November indicated that the capital ratio of FHA’s Mutual Mortgage Insurance Fund was 0.41 percent — well short of the 2 percent minimum mandated by Congress.
At the time, the
U.S. Mortgage Insurers issued a warning about the impact of potential changes to FHA mortgage insurance premiums.
“USMI urges policy makers to proceed cautiously and to carefully assess the impact of any potential FHA premium reductions on its solvency as well as its stated objective of returning the FHA to a smaller and more traditional share of the mortgage market,”
the statement said.
But despite the recommendation, the Obama administration moved forward this week with a 50-basis-point cut to annual FHA mortgage insurance premiums.
Members of the trade group immediately felt the impact.
MGIC
Investment Corp.’s shares closed Thursday at $8.73, down from $9.36 on Jan. 2.
Shares of Radian Group Inc., which opened the year at $16.97, ended today at $15.71.
At
NMI Holdings Inc., shares have fallen to $8.33 from $9.15.
USMI issued a statement Thursday further emphasizing its position.
“USMI member companies urge Congress, FHA, and regulators to work together to further expand sustainable access to credit while increasing reliance on private capital,” the statement said. “Mortgage insurers putting their own capital at risk should be preferred to government risk taking, consistent with the principles put forward by the administration for housing reform.
“The M.I. industry has the capacity and capability to further reduce taxpayer risk and lower costs for many home buyers while expanding access to mortgage credit.”
