Looser Credit on the Way In 'Declining' Markets?

PMI Group, another major insurer, has banned cash-out refis and investor loans in areas it judges to be distressed. Genworth Financial will not consider applications on second homes anywhere in Florida. AIG United Guaranty no longer will write insurance on condominiums in any of hundreds of Zip codes around the country that are on its declining-markets list.

Asked whether his firm might reevaluate its declining-markets restrictions in light of the abrupt changes at Fannie Mae and Freddie Mac, Terry Souers, a spokesman for Genworth Financial's mortgage insurance unit, said, "We're aware of their actions and will take them into consideration to see if additional steps are necessary."

But Michael J. Zimmerman, senior vice president for investor relations at MGIC, said his company has no immediate plans to abandon declining-market restrictions.

"We're not contemplating any changes," he said. MGIC, which reported a $1.4 billion loss for the fourth quarter of 2007 and a $34 million loss for the first quarter of this year, has been hit hard by claims following foreclosures and extended delinquencies in once-booming housing markets.

What's the trend here? Fannie Mae's and Freddie Mac's policy switches should open the door to some additional low-down-payment mortgages -- and home sales -- in areas once tagged as declining.

But without the participation of private mortgage insurers -- who report solely to stock market investors rather than Congress -- many borrowers will probably have to turn to the Federal Housing Administration, which accepts 3 percent down and does not have declining-market restrictions.

Kenneth R. Harney's e-mail address isKenHarney@earthlink.net.