Genworth Mortgage Insurance
Genworth isn’t exactly the largest insurance company in the world, but where it may not have many billions of customers, the company certainly insures as much property as any other insurer. What Genworth lacks in its customer database, the company more than makes up for in the fact that it is now one of the leading mortgage insurance companies.
What is mortgage insurance?
Mortgage insurance, also known as mortgage guaranty services, is a type of insurance that homebuyers purchase in order to protect their lenders from default. In the United States, mortgage insurance is typically required on all property which is purchased with a loan greater than 80% loan-to-value. To obtain mortgage insurance is not a necessarily complicated task, and most banks choose to price mortgage insurance into a monthly mortgage payment to make it a routine institution in the lending world.
Banks may require mortgage insurance for any of the following reasons:
Low population density – In markets where there are few people, there are also likely fewer homebuyers. As a result, the market for rural or suburban homes is in some cases so thin that today’s buyer may wait many months before being able to sell their property. In the case of default, these months add up to a considerable amount of lost time and money for the lending institution, so most now require some type of insurance.
Federal Housing Administration Loans – In order to promote American homeownership, the Federal Housing Administration now offers a universal choice for borrowers who wish to buy their own home using Federal dollars. FHA loans, originated in for-profit banks before being sold to another party, require that buyers put up only a small amount of money in the present or in the future, in order to obtain proper coverage.
Large market risk – Following a collapse in housing prices in the United States, the Federal Housing Administration soon found that they could insure only a few buyers. Instead, most banks and investment dealers pushed their clients to the private mortgage insurance market, an area in which Genworth Mortgage Insurance company operates.
Get below 80
When it comes to your credit score, you’ll be wanting the highest number possible—850 would be best! But when the time comes for private mortgage insurance, especially from a company like Glenworth Mortgage Insurance, you had better hope your numbers come in low.
Mortgage insurance is based on the idea that the bank needs some form of protection against a possible bankruptcy, foreclosure, and/or damage to an abandoned structure. Current law requires that lenders offer mortgage insurance for all homes which are purchased at a 20% discount to market value or less.
The valuations can come from two main sources: an honest appraisal from a real estate brokerage or certified appraiser, or from “comp” data garnered from sales data in your neighborhood. Even if your home sells for $200,000, one low-ball seller in your neighborhood can often displace many years’ worth of appreciation that has been priced into the market. Such an effect is more prevalent in areas with high default rates, as when borrowers default, the bank must immediately foreclose on the property and put it up for sale.
The bank, much like the original purchaser, has an interest in protecting real estate valuations, but it also has an interest in minimizing the number of homes that sell for below market value. At the height of the financial crisis, many investors with positive equity found that the trend can reverse, and as such, the value of their loan then exceeded the value of the home. Acting rationally, the first homebuyer puts the real estate up for sale, and prices within many miles are immediately discounted thanks to the low volume, highly-illiquid investment that is domestic real estate.