The newest and most unusual entry into the private mortgage insurance sweepstakes is showing strong signs of growth.
Chicago-based Amerin Guaranty Corp. announced 1994 volume of new business at $2.5 billion, an 811% increase from the year before. The company, founded in 1992, also announced that several major lenders, including Chase Manhattan Bank and Chemical Bank, would now offer its products.
Amerin, one of the smallest companies in the field, specializes in so- called wholesale mortgage insurance, under which the loan originator makes the underwriting decisions and pockets part of the profit.
"The tremendous growth in volume in 1994 indicates an increased awareness among lenders that wholesale mortgage insurance can help attract new business in an increasingly competitive marketplace, while cutting operating costs," said Stuart Brafman, Amerin's president and chief operating officer.
Amerin's growth has been accelerating in recent months. Wheras its second quarter volume was $285 million, the company pulled in just over $1 billion in the fourth quarter. "We expect 1995 volume to double over 1994," said Gerald L. Friedman, chairman.
Amerin's rapid growth is also a measure of its newness. The company's initial marketing efforts in 1993 met with some resistance, as mortgage originators, swamped with refinancings, found it hard to focus on new products.
As well, the major players in the mortgage insurance field were quick to seize on and incorporate certain parts of the new company's approach.
Many of the mortgage insurance policies sold through Amerin are paid by the lender, which incorporates the cost into the loan. The effect is that the borrower makes a higher monthly payment but has to come up with less money at closing than under traditional mortgage insurance, which requires a year's payment up front.
Shortly after Amerin hit the scene, the major mortgage insurers, including GE Capital Mortgage Insurance and Mortgage Guaranty Insurance Corp., began to offer a new product that allowed borrowers to pay for mortgage insurance on a monthly basis. That product caught on quickly and is now dominant in the industry.
However with refinancings down to a trickle in 1994 and 1995, Amerin has found lenders more interested in turning mortgage insurance into a profit center.
Because Amerin delegates the work of finding business and evaluating borrowers to originators, it has a much smaller staff than its competitors. This, in part, allows it to undercut prevailing costs of mortgage insurance.
