Updated from 8:52 a.m. EST
The private mortgage insurance industry is under severe pressure from rising delinquencies and mounting losses. Now questions are swirling about how a potential blow-up in that sector will affect Fannie Mae(FNM Quote).
As the largest purchaser of U.S. mortgages, Fannie Mae provides an essential backstop to the housing market. The government-sponsored entity, like its brother Freddie Mac(FRE Quote), purchases mostly standard 80% loan-to-value mortgages -- those for which the homebuyer puts down 20% equity.
Due to a quirk in its charter, Fannie Mae is allowed to purchase mortgages with loan-to-value, or LTV, ratios greater than 80% -- and as high as 100%. Generally, these are allowed only if the homeowner purchases mortgage insurance to cover the amount of the loan above 80%. ...
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