Radian Guaranty is the latest private mortgage insurer to announce a change to its pricing structure for borrower-paid policies.
The Philadelphia company said in a press release that the move increases "risk-based granularity" to its pricing structure and allows it to meet the government-sponsored enterprises' capital requirements.
Radian is lowering its rates for mortgage borrowers who have a credit score over 740 and a loan term longer than 20 years, and for borrowers with a credit score over 680 but a loan term of 20 years or less.
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After imposing a virtual moratorium on adding new issuers, Ginnie Mae is again accepting applications from mortgage companies seeking to pool loans for securitization and servicing.
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Understanding how consumers pay their debts over time is expected to widen access to credit for consumers recovering from financial problems or who were hard to score before. Just how many it will benefit is an open debate.
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However, borrowers with a credit score under 740 and a loan term over 20 years will have to pay higher rates.
Pricing philosophy among the private mortgage insurers has become a topic of interest among stock analysts and others who follow the industry, especially after Arch MI U.S. adopted a black-box methodology similar to one used by United Guaranty Corp.
More recently, Mortgage Guaranty Insurance Corp. in Milwaukee disclosed in its fourth-quarter earnings release that it was adjusting its pricing to charge less to higher-credit-score borrowers and conversely more to lower-credit-score ones.
Radian is also doubling the number of credit score buckets used in setting rates to eight from four.
Previously the company increased its rates for lender-paid mortgage insurance products. However, borrower-paid mortgage insurance is more prevalent product, and is believed to make up 75% of all new policies written.
Radian's new lender-paid insurance rates are scheduled to go into effect on March 28 and the borrower-paid rates are to increase on April 7. These increases are still subject to approval by state insurance regulators.
