Good news for cash-strapped homebuyers was bad news for home-loan insurers Monday morning, as a rival's rate-cut plan dropped two Philadelphia-area mortgage-insurance companies into the day's five worst-performing New York Stock Exchange listed shares.
Investors had hoped the companies would post higher profits as a result of the Trump tax breaks; instead, the threat of lower prices is driving traders away from the sector.
Shares of Center City-based Radian fell 15.83 percent, to close at $16.11, while shares of Essent Group, which is nominally based in Bermuda but run from offices in Radnor, also fell 15.36 percent, to close at $35.61, after Milwaukee-based MGIC Investment Corp. announced it will cut the rates it charges homeowners an average of more than 10 percent, with bigger cuts for people with bad credit. MGIC shares closed down 17.16 percent at $10.62. MGIC posted its old and new rates here.
Mortgage insurance is slapped on home-loan agreements, by banks and other lenders, against people who can't come up with large down payments. The banks say the insurance helps ensure they'll collect their money even if the homeowners fall behind on their payments and walk away from their homes, or are foreclosed and forced out.
The rate cuts reflect "the lower corporate tax rate signed into law in 2017" by President Trump, MGIC chief executive Patrick Sinks said in this statement.