Pipeline: Beyond Loans: MGIC to SellHome Warranty Policies

MGIC Investment Corp., the nation's largest private mortgage insurer, is expected to begin marketing home warranty contracts to lenders by yearend.

The policies would cover repair and replacement of plumbing, heating and air conditioning, appliances, and the like.

It is yet another example of a mortgage insurer trying to attract business with an offering beyond the traditional coverage of low-down- payment loans.

Curt S. Culver, MGIC's president and chief operating officer, said the warranty contract would join a menu of products and services for lenders.

For example, MGIC and many other mortgage insurers underwrite loans for mortgage banks on a contract basis. And several mortgage insurers have loss-mitigation and loan-scoring models that they license to lenders as well.

In its home warranty venture, MGIC will not be writing or insuring the contracts. Mr. Culver said he is not expecting to make a profit on this venture.

But Joe Melendez, president of the home service unit of Warrantech Corp. that will issue and service the contracts, said they would complement the basic homeowners insurance product.

MGIC, which is based in Milwaukee, made a five-year deal with Warrantech, a provider of warranties on automobiles, appliances, computers, and other products.

Typically, home warranty products are marketed to real estate agents and are not backed by an insurance company. The agents typically package the service with a mortgage.

Warrantech's contracts, in contrast, are insured by American Zurich Insurance Co., a subsidiary of Zurich American Insurance Group.

The backing from a rated insurance company should be an attractive selling point to lenders, Mr. Melendez said. "There is a lot more financial integrity to the product that we're selling," he said.

MGIC is talking with some customers about starting pilot programs for the product. Mr. Culver said a full rollout is expected by yearend.

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