Confirming that mortgage insurance is a booming business, Mortgage Guaranty Investment Corp., Milwaukee, has reported strong third-quarter earnings.

Its net income was $53.7 million, a 28% increase over the year-earlier period.

"Our revenue base continued to expand in the third quarter, driven by growth in our insurance in force and investment portfolio," said president and chief executive William H. Lacy.

At the end of the quarter, MGIC's primary insurance in force was $116.7 billion, a 16% increase.

The rate of defaults on MGIC insured loans was 1.54%, compared with 1.43% in the preceding quarter. Mr. Lacy said the increase reflects the maturation of the company's insurance in force.

"We also recognize that there was a reduction in borrower credit quality in late 1994 and during the first quarter of 1995," Mr. Lacy said. As a result, he said in the statement, MGIC implemented underwriting changes. The company has since begun to see improvement in the credit quality of borrowers, he said.

New insurance written in the third quarter was level with the year- earlier period, at $9 billion.

Gary Gordon, an analyst at PaineWebber Inc., said he thinks MGIC's performance in the third quarter was "Outstanding. One plus in the thirdquarter was that they were able to keep down their operating expenses."

Mr. Gordon said MGIC figures to continue its strong growth as the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. require more insurance coverage on the loans they buy. And the slumps in two geographical areas with big losses for mortgage insurers - California and the Northeast - are starting to wind down, he said. Home values are drifting back up and becoming more stable, which will help MGIC continue to have strong earnings.

"MGIC is very disciplined on overhead expenses and diversifying its insurance portfolio across the country so they are not subject to downturns in one area of the country," Mr. Gordon said.

He said he believes MGIC, already the leader, captured more of the available market in mortgage insurance. Although the actual numbers for growth in the mortgage insurance business are not yet available for the third quarter, Mr. Gordon said he expects the business to have grown 14%, and expects MGIC to have gained 16% of the market in the third quarter.

Thomas J. Monaco, an analyst at Salomon Brothers, said he expects MGIC to show strong earnings, because of a decline in underwriting expenses which he attributed to automation of the mortgage insurance operations.

Mr. Gordon also said the industry trend is toward loans with low down payments, in which MGIC specializes. Mr. Gordon said he expects those loans to continue to be popular as borrowers feel more comfortable with the loans.

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