According to a statement released on Mortgage Insurance Companies of America’s website today, the number of borrowers in default rose to 58,441 in August, marking a 30% increase in defaults on privately insured home loans last month.
“These defaults are a lagging indicator, so they’re probably going to get worse from here,” said Michael Darda, economist at equity trading firm MKM Partners LP.
And last month, lenders sent out a record 108,716 notices of default, auction or repossession to homeowners, according to RealtyTrac data.
In the statement released on the MICA website, “Mortgage Insurance Companies of America (MICA) reports that 197,169 borrowers used private mortgage insurance (PrivateMI) to buy or refinance a home in August.”
“The number of borrowers using PrivateMI in August was 15.2% higher than the July total of 171,186.”
Private mortgage insurance applications were also on the rise, up 14.3% from July to 206,445.
Private mortgage insurance companies have seen a surge in the sale of coverage as more lenders continue to lower their risk and aim to make loans attractive more attractive for resale.
Policies were up 66 percent to $23.8 billion last month compared with the year-ago period, the mortgage insurance trade group said.
Private mortgage insurance is required for home loans when a borrower puts less than 20% down on a property.
And when borrowers don’t pay, private mortgage insurance companies must reimburse mortgage lenders.
Mortgage insurance can be avoided if homeowners break up the mortgage into a combo loan, so long as the first mortgage does not exceed 80% loan-to-value.
The Mortgage Insurance Companies of America (MICA) is the trade association representing the private mortgage insurance industry, including such giants as AIG United Guaranty, PMI Mortgage Insurance Co., Mortgage Guaranty Insurance Corporation (MGIC), and several others.
Private mortgage insurance companies have struggled this year, leading to sagging stock prices and the recent breakdown of a merger between MGIC and Radian.
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