CUNA Mutual Insurance Group has joined with PMI Mortgage Insurance in a joint venture that will offer mortgage insurance to credit union borrowers.
Creation of the joint venture, to be known as CMG Mortgage Insurance Co.,is aimed at assisting the home financing of low- and moderate-income borrowers. Most mortgage lenders require borrowers who cant pay 20% of the mortgage as a down payment to get private mortgage insurance. And the majority of low- and moderate-income borrowers cant make a 20% down payment. The threshold is set at 20% because studies have shown borrowers with less than 20% invested in a home mortgage are more likely to default.
Mortgage insurance protects a lender if a homeowner defaults. With mortgage insurance the insurer shares the risk of a default with the lender, making it easier for the lender to originate more home loans with low down payments.
Under the program, CMG Mortgage will share in the foreclosure risk with credit unions, allowing more loans to low- and moderate-borrowers.
The mortgage insurance field is dominated by four insurers, San Francisco-based PMI is one. A subsidiary of Allstate Insurance Co., PMI is the third.