Magazine article American Banker

Stopping Short of Subprime, CMAC Investment to Begin Insuring A-Minus Loans

Magazine article American Banker

Stopping Short of Subprime, CMAC Investment to Begin Insuring A-Minus Loans

Article excerpt

CMAC Investment Corp., a mortgage insurer, said it will insure loans to people with less than stellar credit histories.

The company told analysts recently that it would start insuring A-minus loans. Although insurers have written coverage for pools of loans that include some A-minus loans, this is the first instance in which a mortgage insurer has specifically targeted the A-minus loan market.

Borrowers with an A-minus credit rating are those who have had some delinquency problems in recent years but not enough to designate them as B and C, or subprime, borrowers.

Mortgage insurers cover the risk of default on low-down-payment loans for portfolio lenders and Fannie Mae and Freddie Mac, the government sponsored enterprises that buy mortgages. Without mortgage insurance, Fannie Mae and Freddie Mac will not buy loans with a down payment less than 20%.

But as the use of credit scoring has become more prevalent in the mortgage industry, Fannie Mae and Freddie Mac have widened the spectrum of loans they will buy.

Frank P. Filipps, chief executive officer of CMAC, said many of the A- minus loans that CMAC insures will meet Fannie and Freddie's guidelines for purchase.

"Scoring has redefined for every company what an A-minus loan and an A loan is," said an executive with another mortgage insurance company.

The eight private mortgage insurance companies also compete with the federal government, which insures loans through the FHA program of the Department of Housing and Urban Development. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.