Fewer mortgage delinquencies and a pullback by the Federal Housing Administration are fueling a comeback among private mortgage insurance firms, according to a report by Inside Mortgage Finance.
Borrowers who make a down payment of less than 20 percent of a home's sale price are required by the lender to obtain mortgage insurance. The policy protects the lender in the event a borrower defaults on the loan.
During the housing market collapse, the FHA backed 80 percent of home mortgages with mortgage insurance, according to the report, which drove a lot of the private insurers out of the business. Since then, the FHA has raised its premiums in an effort to bring back private insurers, a tactic that seems to be working.
Lower mortgage delinquencies are also enticing private insurers to return to the business. According to Inside Mortgage Finance, there are currently six private insurers. Combined, they wrote close to $49 billion in new business in the second quarter of this year -- 27 percent more than in the first quarter.
Earlier this month, President Barack Obama put forth a housing plan that includes winding down the government-controlled mortgage finance companies Fannie Mae and Freddie Mac. The effort to move the mortgage business from the government to private investors will likely be beneficial to private mortgage insurers.
Keep up with your wealth and mortgages and follow me on Twitter @JudyMartel.
Get real-time rate quotes with Bankrate's Mortgage app.