To the benefit of many insurance companies, the housing market in the United States is beginning to show some signs of recovery as mortgage companies begin their reappearance.
New home loan guarantor, NMI Holdings, has just announced its hiring of the FBR & Co. investment bank in order to help in the raising of $550 million following the collapse of three of its competitors that were taken down by record homeowner defaults. Only one out of those three competitors remains anywhere above credits at a junk grade.
Equally, Essent Guaranty Inc., another upstart, has announced that it is being backed by JPMorgan Chase & Co., and by Goldman Sachs Group Inc.
Analyst Chris Gamaitoni of Compass Point Research and Trading LLC in Washington, and who has worked at Fannie Mae and FBR, said that “I’d love to start a mortgage insurer today” and that “It’s the absolute point in the cycle where you’d want to.”
Insurance companies have been seeing the benefits as the federal government works to reduce its role within the marketplace. Tighter lending standards have made policies much more profitable and yet safer. Also contributing to that outcome are the improved pricing and home values, which had fallen from their peak in 2006 by 34 percent.
Now, according to a National Association of Realtors report, the median price in the housing market has increased over the last year for the first time since November 2010, showing signs that the market is improving.
Mortgage insurance is generally chosen by lenders and paid for by consumers, and is a requirement whenever a property’s value holds a debt that is greater than 80 percent. Some or all of the foreclosure losses are covered by these policies and they offer additional business from the Fannie Mae and Freddie Mac mortgage-bond guarantees which are the main clients of private mortgage insurance companies.