Trend: Watch MI in 2007

National Mortgage News reported in its Daily Briefing yesterday that private mortgage insurance took a beating in the fourth quarter of 2006. "The amount of private mortgage insurance written by the members of the Mortgage Insurance Companies of America totaled $17.8 billion in November, down 5% from $18.8 billion in October," the paper reported.

Expect to see all of that change this year. Borrowers closing loans to purchase homes in 2007 who have annual household incomes of $100, 000 or less will be able to get a low down payment mortgage and deduct the full cost of their mortgage insurance premiums on their federal tax return, according to a MICA press release issued last month.

With the new federal tax deduction, borrowers will have to take a closer look at the home equity piggyback loan when they refinance and brokers will be expected to explain the benefits of each. Given the fact that many borrowers are likely to come back to the table with payment shock after their seconds adjust, moving back into a single mortgage loan may look pretty attractive.

I expect private mortgage insurance to get a boost next year and lenders to increase rates or fees on first mortgages to make up some of what they will lose on HE seconds that don't happen.

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