Thursday, May 03, 2007

PMI: On the upswing

The Associated Press published a story recently on the increase in popularity of private mortgage insurance. The article appeared on Yahoo! News.

The reporter was probably trying to tie to the story closely to the problems associated with what he calls "exotic mortgages" (which used to be called innovative mortgages back when they were putting more renters into their own homes and before they started going into default), as he spent most of the article talking about how with the market changing, MI is back in favor.

The story includes an interesting anecdote about Manuel Santa Cruz, a Tuscon, Ariz. homeowner who wants to secure a fixed-rate loan.

Near the very end of the article, the reporter admits the fact that since private mortgage insurance is now tax deductible, some borrowers are being attracted to it.

In truth, mortgage insurers did not have anything compelling to sell loan officers until interest rates rose, certain second mortgage options disappeared and MI became deductible. Now, they can make money by selling that to borrowers and the business shifts. It's nice to read stories about real people sometimes, even if it means burying the lead.

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