For the mortgage insurance industry the writing is on the wall: The Federal Deposit Insurance Corp. and its regulatory brethren will not recognize the value of mortgage insurance coverage in determining a QRM.
The proposal states that on a QRM loan, "The LTV ratio must be calculated without considering mortgage insurance," adding that although MI "protects investors from losses when borrowers default, and thus lessens the severity of the loss, the statute directs the agencies, in developing the QRM criteria, to consider whether mortgage insurance reduces the risk that default will occur in the first place."
The language is potentially a blow to MI firms, but is not predicted to cripple the industry. Said one observer: "It's not what we wanted, but we'll see how this plays out."
