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Investments

What does the future hold for MI?

Four out of five ABS panelists take a dim view

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KEYWORDS ABS Vegas / MI
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Mortgage insurers hoping to carve out a new space in the future mortgage securitization market may want to hold their breath. Investors attending the ABS Vegas 2014 conference in Las Vegas seem rather shocked that insurers expect such an easy entrance back into the market.

HousingWire reporter Trey Garrison dispatched the following update from the conference. It reveals that while MIs want to carry some of the risk of loan securitization in the future, not everyone on the investor side is confident in the MI business structure.

Sharif Mahdavian, managing director of Standard & Poor’s Ratings Services, fielded a question about private mortgage insurance.

"Way back when we had private mortgage insurance – they didn’t do a good job and went out of business. Is someone willing to go into that business to give more comfort to people buying non-agency securities?" the audience member asked.

Patrick Tadie, executive vice president with BNY Mellon, said he thinks there’s no road back right now for private mortgage insurers.

"With the absolutely low level of rate, MIs wouldn’t carve out what they would want to charge," Tadie said.

Howard Kaplan, a partner with Deloitte & Touche, said investors aren’t that interested.

"It would be a risk transfer that I don’t think would be acceptable. You’re transferring risk to third parties, and that could create additional risk. I think investors would simply prefer mortgages that don’t require that," Kaplan said.

Steven Abrahams, head of securitization and mortgage-backed securities research at Deutsche Bank Securities, agreed.

"It’s another level of complexity to insert MI in there," Abrahams said.

Joseph Buonanno, partner at Hunton & Williams, took a contrarian view, saying there would be a place for MIs as the market evolves.

"While everything they said is legitimate, MI is necessary because of GSE requirements. We’ll see their role change with the space," he said.

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