Housing Data Good News for Mortgage Insurance
Mortgage insurers saw a leap in demand after the National Association of Realtors (NAR) released a report on Tuesday, Dec. 22. The report released better-than-expected home sales and increased hope that the sector wouldn’t suffer as heavy a loss as once thought from millions of defaults and foreclosures.
What is Mortgage Insurance?
Some may equate mortgage insurance with homeowners insurance, but they are not one in the same. While homeowners insurance protects the financial wellbeing of your home in the event that it succumbs to damage, mortgage insurance helps homebuyers who don’t have enough money to pay for the traditional 20-percent down payment.
The insurance is usually only required if the down payment is less than 20 percent of the sales price. Once the principal is reduced to 80 percent of the value, mortgage insurance is usually no longer required. However, in some cases, the mortgagor will default on the loan before reaching the 80 percent principal, which means the mortgage insurance company will be responsible for paying the claim.
How the Report Affects Mortgage Insurance
The report released by the NAR last week showed that home re-sales rose 7.4 percent in November. This number more than doubled the 3.3 percent increase economists expected. This is good news for mortgage insurance because it could mean that homeowners are in a position to buy homes again and, while they may need insurance, won’t default on their loans, which would require the insurers to pay out.
Mortgage insurers have already lost a significant amount with having to pay out claims due to the surge in foreclosures over the past year.