Chase Manhattan Mortgage has begun to offer lender-paid mortgage insurance through its correspondent division.
Lenders have been offering the product primarily through retail branches. Lender-paid insurance has been around since 1993, but the Department of Housing and Urban Development approved it only a year ago.
Typically, borrowers who take out a low-down-payment loan must purchase mortgage insurance as a protection against default.
With lender-paid mortgage insurance, the lender buys the insurance and covers the cost by charging a higher rate on the loan.
Unlike the cost of traditional mortgage insurance, this higher rate is tax-deductible.
Deane Hall, executive vice president, correspondent lending for Chase, said its network of more than a thousand correspondents received information on the product last week. The policies are being offered on 30- year fixed-rate conforming and jumbo loans.
For now, Chase is offering the lender-paid insurance provided by Amerin Corp., the Chicago-based mortgage insurer that pioneered the product. But Mr. Hall didn't rule out offering versions from other insurers. Chase, the nation's third-largest originator of mortgages, also has set up a mortgage reinsurance subsidiary with the help of Amerin.
Chase's retail offices already offer Amerin's lender-paid product. Mr. Hall said the retail and wholesale versions are the same.
Jerome J. Selitto, an Amerin executive vice president and national sales and marketing director, said it has taken longer for lender-paid insurance to catch on with wholesale lenders because loan officers need training to show borrowers they'd save money in the long run.
Mr. Hall said Chase also plans to roll out the product to its broker division, but he didn't disclose when.
Chase is the first lender to disclose that it is selling lender-paid insurance through wholesale channels.
Mr. Selitto said another big Amerin customer, which he declined to name, is also selling it through correspondents.
Offering the policies through wholesale channels will help Amerin sell other products to wholesale lenders, Mr. Selitto said.
Amerin does much of its business with large mortgage lenders, mainly through retail outlets.
"Our strategy this year and going forward is to start penetrating additional channels of our customers' business," Mr. Selitto said.
Still, analysts said lender-paid insurance has not been a huge hit for mortgage insurers. Steven Schwartz, an analyst with ABN Amro/Chicago Corp., said the higher mortgage rate makes it hard to sell.
