Mortgage Insurers Raise Bar

Wall Street Journal (07/15/08) P. A1; Merrick, Amy
Hit hard by a steady stream of downgrades by the credit-rating agencies, the nation's mortgage insurers have been tightening their standards and offering borrowers fewer ways to avoid purchasing private mortgage insurance--a type of coverage that is required for those unable to make a full down payment or who have spotty credit. In recent months, these carriers have been categorizing more and more of the country as a "declining market," raising the requirements and making such insurance more difficult to obtain. During the previous housing boom, borrowers were often able to avoid mortgage insurance by taking out two loans: one that covered four-fifths of the home's purchase price and a second "piggyback" loan that covered the traditional 20-percent down payment. With piggyback loans all but gone in this era of tighter credit, prospective home buyers have come under increased pressure to buy mortgage insurance; and the overall buying pool has consequently diminished.