Now that the Treasury Department has agreed to bail out certain life insurance companies with Troubled Asset Relief Program money, speculation is that mortgage insurance companies could be next.
One MI executive, requesting anonymity, told National Mortgage News that "there are more conversations going on with Treasury that are real and tangible."He added that, "They know how important we are to Fannie [Mae] and Freddie [Mac]." Fannie Mae and Freddie Mac are wards of the government and the nation's seven MI firms have written billions of dollars of coverage that affect loans held in portfolio or guaranteed by the two. If the MI industry collapses, the firms might not be able to make their claim payments which in turn would hurt the GSEs and the taxpayers which now essentially own the two.