Mortgage Insurance

The widening sub-prime meltdown spread more pain Monday as the financial markets absorbed reports from a number of companies of problems stemming from mortgages issued to people with poor credit: • Mortgage insurers MGIC Investment Corp. and Radian Group Inc. said they might write off their combined $1.03-billion stake in a venture that invests in sub-prime mortgages on which payments were past due. • American Home Mortgage Investment Corp.

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.

Ordained as a minister and acquitted in a $2.7-billion fraud, fired HealthSouth Chief Executive Richard Scrushy is done with the corporate boardroom. Now, he says, it's all about God. Scrushy has helped found a ministry he says is feeding starving children in Africa and is planning further missionary work. It also wants to build a Bible-based university and offer services including mortgages, insurance and healthcare, he says.

More than a year ago, Philadelphia-based mortgage insurer Radian Guaranty came to California with what seemed like a great deal for hundreds of thousands of people refinancing their homes. It offered an alternative to title insurance called lien protection that is often 50% cheaper and takes a fraction of the time to complete. Refinancing has often been the occasion for homeowners to buy entirely new title coverage.

A California administrative law judge Monday upheld a Department of Insurance cease-and-desist order against Radian Guaranty Inc. that prohibits the Philadelphia-based mortgage insurer from selling its Radian Lien Protection policies. The department issued the order in June because Radian is licensed to sell only mortgage guaranty insurance in California.

MaryHelen Galvez sacrificed homeownership for 13 years to afford private school for her daughter. Those tuition payments--as much as $3,500 a year--could easily have been saved for a down payment on a home. "I wanted to send mi hija [my daughter] to Catholic school," said Galvez, 44, a medical caseworker. "Being a single parent, I needed the extra support private school could provide. I don't regret it at all. It was an investment in my daughter."

The private mortgage insurance industry launched PrivateMI en Espanol this week to provide information in Spanish about private mortgage insurance and how it compares with other home financing options. "Although Hispanics are the fastest-growing minority group in America, they are still underrepresented in the ranks of homeowners," said Frank P. Filipps, chairman and chief executive of Radian Guaranty.

In a pro-consumer move, the Bush administration has decided to allow automatic termination of mortgage insurance premiums for new customers using the nation's largest source of federal home loan money. The decision, not yet formally announced but scheduled for implementation this summer, effectively provides home buyers under the Federal Housing Administration (FHA) mortgage program equal treatment with borrowers in the conventional marketplace who pay private mortgage insurance (PMI) premiums.

Regarding "A First-Timer's Balancing Act" by Diane Wedner, March 25, the saga of 34-year old Kannyn MacRae's handwringing over buying his first home: MacRae's aversion to paying mortgage insurance may be very short-sighted. Had he purchased a home several years ago putting 10% down, he'd be enjoying homeownership, keeping some of his cash, having income-tax benefits and earning equity-the combined value of which may well have exceeded the cost of mortgage insurance (which can usually be eliminated once 20% of mortgage principal is paid)

A policy change earlier this month by the giant mortgage investor Fannie Mae symbolized a market transformation of huge importance to home buyers. By adding zero down payment mortgages to its standard line of loans, Fannie Mae closed the door on an era: From Colonial times through the last century, conventional home mortgages always required a cash contribution by the home buyer, the down payment.