General Electric Co.'s mortgage-insurance unit has started offering 100% coverage for no-down-payment loans -- even before all the regulatory barriers have been lifted.

On April 11, GE Capital Mortgage Insurance Corp. began offering the coverage for loans of up to $325,000. The insurance is available only to borrowers with excellent credit; the minimum Fair, Isaac & Co. credit score to qualify is 700.

"The goal is to help people whose only barrier to homeownership is the down payment and who have the proven ability to handle it," said Mark E. Goldhaber, vice president for affordable housing at Raleigh, N.C.-based GE Capital.

Several mortgage insurers have no-down-payment programs, but GE Capital's is only the second that assumes all the risk.

The biggest obstacle to such programs have been state laws against fully insuring loans for more than 97% of a home's value. In three of those states, if an insurer does something in another state that is illegal under the latter's insurance laws, it can be barred from selling in its home state.

New York legalized 100% loan-to-value mortgage insurance last May, and California followed suit in January. That left Illinois as the only state with what amounts to extraterritorial authority to prohibit insurance for such loans.

The Mortgage Insurance Companies of America, a trade group, is lobbying the Illinois Department of Insurance -- which did not return a call to comment for this article -- to change that. Mortgage insurers say state officials have been receptive to the idea of changing the rule, which explains why GE is moving ahead.

"Illinois is working with the industry, so we don't expect [the state] to turn around and try to pursue extraterritorial action," Mr. Goldhaber said. He added that for now GE is not offering 100% coverage in Illinois.

Others are being more cautious. A spokesman for Mortgage Guaranty Insurance Corp. of Milwaukee said it has a 100% program in the works but is waiting on Illinois to change its regulations. "We don't want to get out in front of regulators," he said. "There's no sense hitting the street with a program that couldn't become operable until the regulators made up their mind."

United Guaranty Corp. of Greensboro, N.C., has been offering 100%-loan coverage since November 1998. It circumvented the extraterritorial authority of states like Illinois by offering the program through a subsidiary, United Guaranty Mortgage Indemnity Co.

Mortgage Guaranty and GE Capital also have programs in which the lender or a community activist group puts an amount equal to 3% of the home's value in a special account as extra collateral. Though the borrower puts nothing down, the loan is considered a 97% mortgage -- so the insurance can be offered nationwide.

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