Mortgage Insurance

Defaults on privately insured U.S. mortgages rose 35% in November to a record, an industry report showed Monday, adding evidence about the depth of the U.S. housing slump. The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington-based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9% increase from October.

Defaults on privately insured U.S. mortgages rose 38.1% in February, as a growing number of homeowners failed to keep up with their loan payments. The Mortgage Insurance Cos. of America, a trade group, said Monday that 60,911 insured borrowers were at least 60 days late on payments in February. That is up from 44,111 a year earlier, but down 11.7% from January's record 68,950.

Michael and Esther Maston had hoped the fertility drugs would work, but they weren't ready for the news that they were going to have triplets: a boy and two girls. "We can't afford to send three kids to college" at the same time, Michael, a civil engineer for Rancho Cucamonga, recalled saying in the doctor's office that day in 2001. Since then, the Mastons have been focused on saving for their children's college educations and building a retirement fund for themselves.

A new income-tax deduction is available to homeowners who carry private mortgage insurance -- a protection for the lender should the buyer default. The Tax Relief and Healthcare Act of 2006 -- which went into effect Jan. 1 and will end Dec. 31 -- added a provision for home buyers with down payments smaller than 20% that allows them to deduct the total cost of PMI they may be required to carry.

Long-awaited federal consumer protections for homeowners with private mortgage insurance almost squeaked through Congress in the closing hours before the Memorial Day recess. But for the second time in six months, House and Senate members headed home without completely resolving this sticky, contentious and expensive issue.

The House approved a bill Tuesday to automatically cancel private mortgage insurance when it is no longer needed, a move that could save many homeowners hundreds of dollars a year. The bill, passed by voice vote, provides for the cancellation of private mortgage insurance when a homeowner has 22% equity in his or her home. A homeowner with a good payment record whose home has not depreciated below the purchase price can ask that the insurance be canceled upon reaching 20% of equity.

Congress' fractious rush to adjournment recently obscured intense behind-the-scenes fighting over an issue that could cut monthly mortgage costs for millions of home buyers who pay for private mortgage insurance. The controversy, certain to attract lots of attention in 1999, concerns a surprise move by one of the largest mortgage finance sources--Freddie Mac--to dispense with traditional mortgage insurance policies on some or all of the low-down-payment mortgages it buys from local lenders.

Homeowners may be able to save money under a bill approved by the House on Wednesday that would end the paying of unnecessary private mortgage insurance. The House voted 421 to 7 to approve the bill that would require lenders to notify homeowners annually of their right to cancel after building up enough equity to secure their home loan.

How do homeowners required by their lenders to have mortgage insurance know when they no longer need such coverage? Lenders certainly aren't volunteering the information. So the House and Senate are each considering legislation that would force disclosure by lenders on when and how borrowers may cancel their mortgage insurance. This consumer protection is long overdue. The requirement would put to an end a widespread and notorious mortgage industry practice.

If you have private mortgage insurance, you could be on the verge of getting important new federal consumer protections designed to prevent you from being hit with abusive overcharges on premiums. In rapid succession in recent weeks, legislators in both the Senate and House introduced bills that would force all lenders for the first time to disclose to borrowers how and when they can cancel their mortgage insurance coverage.