Oct. 21 (Reuters)—MGIC Investment Corp , the largest publicly listed U.S. mortgage insurer, said reinsurers were interested in entering the mortgage reinsurance business, attracted by the high returns that could be earned from underwriting new mortgages.
While the mortgage insurers are struggling under the weight of defaults from loans underwritten during the housing boom, stricter underwriting standards by banks and insurers mean the current crop of mortgages are of a much higher quality.
“I think in discussions that we've had, there are people that are interested, as the quality of the (new) business is very good,” MGIC Executives said on their post-earnings conference call.
Reinsurers, which sell insurance to the primary insurers, have spare capacity and capital that could be used to enter the mortgage space.
On the call, MGIC Investment executives said any entry by reinsurers would help serve as “back-door capital” and reduce the strain on the private mortgage insurers.
Mortgage insurers like MGIC and its rivals PMI Group and Radian Group have so far had to create and capitalize reinsurance subsidiaries to spread the risk on their books.
MGIC Investment is close to breaching the maximum risk limit, PMI's sky-high risk led regulators to stop its from writing new insurance and life insurer Genworth's U.S. mortgage unit is already at the limit.
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