Study shows insured mortgages were more likely to survive the housing crisis

Promontory Financial Group recently released a study which found that of the loans originating before the housing bubble burst, mortgages with low down payments and mortgage insurance were less likely to default during and after the housing crisis than uninsured mortgages with low down payments and a second mortgage.

Low down payment loans with second mortgages, the most prevalent alternative to mortgage insurance, had a 21 percent greater chance of default than insured loans. James Bennison, CFA and senior vice president of U.S. Mortgage Insurance Strategy and Capital Markets, said the research proved that mortgage insurance can reduce defaults without creating undue risk to the market.

"Regulators should include such loans with private mortgage insurance as an acceptable exemption to risk retention requirements under QRM, so this reliable private sector source of capital can continue to support the nation's housing recovery through responsible lending to creditworthy borrowers," Bennison said.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 includes provisions on bank regulation, consumer protection and mortgage reform and anti-predatory lending. Bloomberg recently reported nominees for U.S. bank regulators will undergo questions regarding the implementation of the legislation and its proposed regulations at a Senate Banking Committee hearing. The committee will speak with Martin Gruenberg who is a nominee for chairman of the FDIC, and Thomas Curry, nominated for comptroller of the currency.  

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