OREANDA-NEWS.  Clarity around the long-term demand for U.S. mortgage insurance products is beginning to take shape as the industry returns to profitability, according to Fitch Ratings.

Increased market stability, the continued presence of Fannie Mae and Freddie Mac in the residential mortgage market, and enhanced regulatory standards bode well for the industry's stability.

'While the long-term viability of U.S. mortgage insurance doesn't appear to be in jeopardy anymore, the industry has evolved since the recession,' said Don Thorpe, Senior Director, Insurance.

'Improvements in mortgage underwriting have attracted new participants and pushed the industry back to profitability.'

From 2008 - 2012, the industry incurred costs of approximately $2 for every dollar of premium it earned, pushing three of the original eight mortgage insurers to cease writing new business.
Fitch expects the volume of rescissions to drop as improvements in underwriting minimize the need to mitigate losses on troubled mortgages. Profits will be supported as mortgage insurers no longer cede premiums to captive insurers.

However, regulatory scrutiny remains. Still unknown is which recommendations from the National Association of Insurance Commissioners' (NAIC) working group will be implemented, and which states will adopt risk-based capital standards.

Despite the industry's improved outlook, the mortgage insurance industry will remain closely tied to the U.S. economy, potentially leaving it vulnerable to downturns in home prices, employment, personal income levels and interest rates.

The full report 'U.S. Mortgage Insurance: A Market in Recovery" is available at www.fitchratings.com.