An association representing mortgage insurers is defending the firms’ role in the greater mortgage finance market after an analyst report surfaced this week, suggesting the companies are no substitute for a 20% downpayment. “The facts are that the financial health and stability of the private mortgage insurance industry today are a testament to the proven validity of its business model that worked during the worst housing market downturn since the Great Depression,” the Mortgage Insurance Companies of America said Friday. The trade group also said the available private mortgage insurance capital “would enable financial markets to originate 1.3 million insured, low-down payment loans annually for the next three years.” The MICA issued the statement after analysts with Institutional Risk Analytics said mortgage insurers are vying for a spot in the Dodd-Frank world, where they would play a role in the prime mortgage market once the Federal Reserve defines a qualified residential mortgage. “Once that is achieved, the next goal is said to be creating a safe harbor for MIs in the qualified mortgage definition to be set by the Consumer Financial Protection Bureau,” analysts with IRA wrote. “To us, any loans that fit the QRM designation should have 20% down payments, not second liens, mortgage insurance or other structural enhancements.” In response to those statements, MICA defended mortgage insurers as buffers against risk. “Private MIs have paid all legitimate claims,” the association said. “Since 2007, private MIs have paid Fannie Mae and Freddie Mac a combined total of $22 billion in claims and receivables on insured mortgages. The amount is equivalent to more than 14% of total U.S. taxpayer dollars paid to these two agencies as of year-end 2010.” Write to Kerri Panchuk.

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