WASHINGTON (Reuters) - The main regulator for Fannie Mae FNM.P and Freddie Mac FRE.P on Thursday said he sees a future for mortgage insurance companies that underwrite many loans for the two mortgage finance giants.
“They’re very important,” James Lockhart, chief of the Federal Housing Finance Agency, told reporters. “I’m a strong believer in the private market. The idea of some risk sharing with the private market makes a lot of sense. The second-underwriting that they do, makes a lot of sense.”
A key business for mortgage insurers like PMI Group PMI.N, Radian Group Inc. (RDN.N) and Genworth Financial Inc. (GNW.N) is to protect Fannie Mae and Freddie Mac from the costs of defaulting home loans. The companies that specialize in that business have been strained by the current housing downturn and record foreclosures.
Lockhart, who spoke to reporters after addressing a conference of the Association of Government Accountants, said he would like to see mortgage insurance companies receive a capital injection under Washington’s financial market rescue plan. His voice, however, is just one among policy-makers debating how to stabilize financial markets without burdening taxpayers with more costly bailouts.
“The right step is to get them some more capital so they can get back in the game,” Lockhart said.
Reporting by Patrick Rucker, Editing by Leslie Adler