The next domino likely to topple is the so-called private-mortgage-insurance industry, which permits buyers to purchase homes without making a full 20% down payment. Private mortgage insurance covers the first 25% of a mortgage's value against default, plus accrued interest. Some $700 billion of U.S. mortgages carry such insurance, with most of it owned by Fannie Mae and Freddie Mac and backed by the federal government.
The most at risk are the three companies that specialize almost exclusively in the coverage: MGIC Investment (NYSE: MTG - News), Radian Group (NYSE: RDN - News) and PMI Group (NYSE: PMI - News). The other chief participants in the industry—Genworth, United Guaranty and Republic Mortgage Insurance—have the distinct advantage of having corporate parents with diversified business lines and more financial resources with which to buttress their businessesRead it all