A.M. Best Reports Mortgage Guaranty Insurance Evolves Into Major Force in Real Estate Market.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 14, 2003 Mortgage guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. insurance is evolving into a major factor affecting the real estate market, with net premiums reaching $3.7 billion in 2001, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the special report, "The Mortgage Guaranty Insurance Industry and its Role in the Residential Real Estate Market," recently released by A.M. Best Co. Because the real estate market remains dependent on the economy, there are a number of potential downside risks for mortgage guaranty insurers, such as interest-rate levels, credit risk, interest-rate risk, consumer demand, political risks and consumer debt levels. However, bank consolidations, regulatory and economic changes, new and enhanced mortgage products, competition, automation and consumer demands have contributed to the rapid growth of the mortgage guaranty industry. Mortgage insurers bridge the loan-to-value requirements of government-sponsored enterprises--such as Fannie Mae Fannie Mae: see Federal National Mortgage Association. or Freddie Mac--which cannot accept mortgages with loan-to-value ratios of less than 20%, and primary lenders for home buyers. This distributes the risk of foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. between the lender and the mortgage insurer. The private mortgage sector is dominated by six companies: GE Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., PMI See Private Mortgage Insurance. Mortgage Insurance Co., Radian ra·di·an n. Abbr. rad A unit of angular measure equal to the angle subtended at the center of a circle by an arc equal in length to the radius of the circle. Guaranty Inc., Republic Mortgage Insurance Co. and United Guaranty Corp. The Federal Housing Administration Federal Housing Administration (FHA) Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures and Department of Veterans Affairs Veterans Affairs is a term of the business that deals with the relation between a government and its veteran communities, usually administered by the designated government agency. , which in aggregate accounted for 41% of the total mortgage insurance market in 2000, also compete in this market. Net premiums written for the mortgage guaranty industry were about $3.7 billion in 2001, an increase of more than 3,000% since 1980. During this time, the industry's expense ratio declined to 22 in 2001 from 70 in 1980, reaching a level comparable to the property/casualty industry. Reserve leverage dramatically increased during the 1990s, growing to more than 300 from a low of 100, reflecting the rapid expansion in the 1990s. BestWeek subscribers can download a free printed copy of the full 15-page special report, "The Mortgage Guaranty Insurance Industry and its Role in the Residential Real Estate Market," or a combination of the printed report plus a spreadsheet file of the report data for $75 from our Web site, www.bestweek.com. Nonsubscribers can download a printed copy of the full 15-page special report for $50 or a combination of the printed report plus a spreadsheet file of the report data for $125 from our Web site, www.bestweek.com. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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