A newspaper columnist calls their service "one of the crummiest deals around." Lawyers accuse more than half of the industry of making kickbacks. A U.S. senator describes its practices as "unethical."

Finally, private mortgage insurers are preparing to fight back. Executives at the top mortgage insurers will not say exactly what they plan to do, but late last year their trade group, the Mortgage Insurance Companies of America, retained Porter Novelli, a prominent consumer public relations firm known for its work with Gillette Co., Procter & Gamble, and anti-tobacco activists.

"We've recognized that it's an issue for our industry," said Charles M. Reid, chief executive officer of United Guaranty Corp. in Greensboro, N.C., and current president of the trade group. (The post rotates among the chiefs of its seven member companies.)

You would think the industry has plenty to brag about. It has played a crucial role in the housing finance system. Without its service, many homeowners would have been unable to buy and the nation's financial institutions - and arguably the government - would be at greater risk.

Private mortgage insurance protects the holder of a loan in case the homeowner defaults. It is usually required when a homebuyer cannot put down 20%. According to the Mortgage Insurance Companies of America, last year the industry insured $189 billion of new mortgages for about 1.45 million homeowners.

Indeed, decades ago the media touted private mortgage insurance as a less expensive and simpler alternative to the government's FHA program and hailed Max Karl, founder of Mortgage Guaranty Insurance Corp. and inventor of modern private mortgage insurance, as a housing hero. Mr. Karl died in 1995.

A crucial turning point came in the late 1990s, when it was revealed that some borrowers had been paying monthly insurance premiums long after they had built substantial equity in their homes. An uproar led to legislation mandating automatic cancellation once a borrower's equity reaches a certain level and disclosure to the borrower when and how coverage can be canceled.

"The mail would pour in from furious people" who tried to get their policies canceled but couldn't, recalled Jane Bryant Quinn, the well-known personal finance columnist.

Critics say the insurers dropped the ball.

"They were, for many years, collecting premiums from consumers whom they had every reason to know were not real economic dangers," said Kenneth Harney, a syndicated writer who chronicled the battle over the cancellation bill in The Washington Post. "For years they knew about it and did nothing about it. When it became a public matter, they were very slow to come to the reform party."

The insurers "did not step to the fore, grab the problem by the horns, and say, 'Let us straighten this out,' " Mr. Harney said. "Instead, they were content to say: 'We are passive players. We are told by our insured customers when they want to cancel.' "

However, he added, after being "dragged to the table" the insurers "were ultimately involved in the final fine-tuning" of the cancellation bill, which was passed in 1998 and took effect last year.

Ms. Quinn agrees. "When the uproar did start and the issue was in Congress, the insurers were not taking a pro-consumer position. They were very tough on the side of 'We don't need anything,' " she said. "During that period, you didn't get an awful lot of sympathy from the [mortgage insurance] people for what was bothering the consumer."

The insurers say they were not to blame, that before the legislation was passed it was the investor's prerogative to decide when a policy could be cancelled and the servicer's job to terminate it. They insist that they supported the cancellation bill from its inception, that they had problems with details of the early drafts but always backed the pro-consumer principles behind it.

And they say the publicized estimates of how many homebuyers were overcharged - hundreds of thousands, according to some news reports - were grossly exaggerated.

"Out of all that we were portrayed as trying to block the legislation," Mr. Reid said. "in the process the negative impressions occurred with consumers, maybe some Realtors, and the press in general."

Frank P. Filipps, chairman of Radian Guaranty in Philadelphia, goes as far to say that the legislation was unnecessary and that Fannie Mae and Freddie Mac, the two largest mortgage investors, could easily have accomplished the same goals without an act of Congress by simply changing their cancellation guidelines.

The push for legislation was "a political football," Mr. Filipps said. "It's something that was undertaken in an election year to get press coverage." Indeed, Alfonse D'Amato, who introduced the cancellation bill in the Senate when he was the Banking Committee chairman, attacked the mortgage insurers in the papers.

But the cancellation controversy was not the only cause of the mortgage insurers' image woes. Part of the problem stems from the way the service is structured: The consumer pays for it but is not the one covered by the insurance. And the lender, not the consumer, chooses the mortgage insurer.

This contrasts sharply with other types of insurance, noted David Graifman, an analyst at Keefe, Bruyette & Woods Inc. For such products as life and auto insurance, the consumer decides whether and how much coverage to buy and can shop around for the best price.

But with mortgage insurance, "a lot of people don't realize they need it before they go to the closing table," Mr. Graifman said. "There's no decision to purchase it, no decision about how much to buy." Homebuyers, he said, "probably feel strong-armed by lenders" into buying coverage.

The industry enjoyed much more favorable publicity and consumer sentiment in its early days, in part because the companies were forced to be proactive. When Mr. Karl founded MGIC in 1957, mortgage insurance was banned in a dozen states, the legacy of the Great Depression, when collapsing real estate values decimated an earlier generation of mortgage insurers.

Mr. Karl traveled around the country, promoting his vision of a more soundly regulated mortgage insurance company and lobbying the states to legalize it. "We had almost a missionary zeal about trying to explain this concept," recalled Leon T. Kendall, who was an officer of MGIC in the 1970s and 1980s.

Gerald Friedman, Mr. Karl's nephew and himself a longtime veteran of the mortgage insurance industry, said his uncle and other early leaders were "outspoken advocates of the industry, were on podiums all the time, and were well known."

Over the years some mortgage insurers were sold to huge conglomerates like General Electric and American International Group Inc. (United Guaranty's parent), and the industry's focus on promoting the virtues of their product "may have been diminished," Mr. Friedman said.

Mr. Reid of United Guaranty insists that he and his contemporaries are just as vigorous about promoting mortgage insurance as their predecessors. He noted that most of the companies have affordable housing initiatives and work with community groups, state housing agencies, or Fannie and Freddie to help low-income families buy homes.

"The CEOs dedicate a lot of personal time to doing things that Max Karl did," Mr. Reid said. "If anything, they're even more active."

But Mr. Karl's audiences were thrift executives, Realtors, and homebuilders. What the industry arguably lacks today are passionate advocates that speak directly to the consumer.

Mr. Kendall, now a finance professor at Northwestern University, said that in Mr. Karl's day the insurers' public image was aided by the savings and loans, which were the chief beneficiaries of the coverage before the rise of the secondary market. The thrifts' loan officers explained and promoted mortgage insurance to the home-buying public, Mr. Kendall said.

But the agents that now originate most home loans -mortgage bankers and brokers - do not hold the loans and therefore have less incentive to endorse it, Mr. Kendall suggested. "When we lost [the S&Ls] we lost our direct line to the consumer."

Ironically, the economic boom is another contributing factor to the mortgage insurers' image problem. Though it means the insurers have paid fewer claims than they have in 20 years, it also means that the public has forgotten why it can be worth it to pay premiums.

The zeitgeist was expressed in a Philadelphia Inquirer column last year that questioned the need for mortgage insurance: "Foreclosures aren't all that common. And most homes appreciate, so lenders' chances of unloading a foreclosed property for more than the remaining debt are usually pretty good."

With such a rosy outlook, it is difficult to imagine that private mortgage insurers paid more than $7 billion of claims in the recession of the late 1980s. The companies absorbed losses that otherwise would have been suffered by banks' and thrifts' insurance funds - not to mention Fannie and Freddie.

"When times are good, everybody thinks these companies are stealing candy from a baby," said Mr. Graifman at Keefe Bruyette. "They forget than in the '80s they were losing loads of money."

Perceptions do matter. In recent years the industry has had to contend with competing forms of credit enhancement. There's the "piggyback," or "80/10/10" loan, which combines an 80% first mortgage, with a 10% second mortgage and a 10% down payment.

Ms. Quinn said some banks have been marketing piggyback loans to consumers as a better deal than mortgage insurance. "I suspect some of the bad words [about the insurers] are being spread by banks," she said.

And a year ago Fannie and Freddie came out with alternative insurance arrangements that allow the homebuyer to purchase less coverage, in exchange for an up-front fee or a higher interest rate - which the insurers viewed as an incursion on their turf.

Mr. Friedman, Max Karl's nephew, is now chairman of FM Watch, a coalition of financial services trade groups formed last year to fight expansion by Fannie and Freddie into business other than buying mortgages - such as insuring them.

When FM Watch made its debut last year, Fannie and Freddie initially depicted the coalition as simply a lobbying group for the mortgage insurers, even though its membership included many other types of companies - indicating just how unsympathetic consumers have become to mortgage insurers.

Kenneth Posner, an analyst at Morgan Stanley Dean Witter & Co., has long argued that consumers' negative dispositions, combined with the threat of competing products, portend slower growth for the mortgage insurance industry.

Mr. Posner is not as bearish as he was two years ago, largely because the stocks have become cheaper. "Some of the competitive threats are materializing more slowly than we had expected," he added, noting that Fannie and Freddie's "lowest-cost MI" plans haven't caught on. But the insurers' lack of direct connection to the consumer remains a "challenge" for them, he said.

Public sentiment also matters because Congress could pass burdensome legislation, Mr. Friedman said. And a bad-guy image makes the mortgage insurers an easy target for trial lawyers. In December four of the seven companies were served with class actions accusing them of making kickbacks to lenders at the expense of consumers. While legal experts question the merit of these suits, they are at the very least a drain on management time and resources.

Sympathetic observers say the Mortgage Insurance Companies of America has kept too low a profile and focused on lobbying rather than on communicating its message to the press and the general public.

"In hindsight, Mica probably should have had a national ad campaign or something like that," Mr. Kendall said. The insurers' image problems "started with a couple Congressmen and reporters, and nobody put the fires out."

Suzanne Hutchinson, the trade group's executive vice president, noted that last year it sponsored a speaking tour by John Witty, a personal-finance commentator. The group last year also launched a Web site, privateMI.com, which explains the product in clear language. And noting that Fannie Mae's famous television ads cost tens of millions of dollars, Ms. Hutchinson said, "most private corporations don't have the budget to do that."

Mortgage insurance companies themselves are reluctant to embark on consumer branding campaigns. "The fact of the matter is that the lender and the investor are our customers," said Curt S. Culver, chairman and chief executive of MGIC.

Critics say that line of thinking is at the core of mortgage insurers' public relations problem. "Anyone who does not recognize the centrality of the consumer in today's marketplace will be dead in the water," said David Jeffers, a spokesman for Fannie Mae.

Though insurers might protest that theirs is a business-to-business industry, Mr. Jeffers said:

"That's irrelevant. Technically speaking, we're a business-to-business enterprise - probably even more so, because we'll never have any contact directly with the consumer in a transaction. That doesn't preclude us from having to focus, laser-like, on what the consumer wants."

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