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Mortgage delinquencies continued to climb for mortgage insurer Genworth Financial Inc. (GNW), but the good news is that as many as half the delinquent homeowners it insures are eligible for home-loan modification programs, the company said.
In the third quarter, 11,500 of the delinquent loans it insures were eligible for the Home Affordable Modification Program, or HAMP, which was launched earlier this year. That number is up from around 1,200 that were qualified for the program in the second quarter, said Kevin D. Schneider, chief executive of Genworth's U.S. mortgage insurance unit.
"Clearly, we see increased activity, and this may become more important in 2010," Schneider said during the insurer's third-quarter earnings conference call Friday. He said that of the number of borrowers that were called qualified to participate, he did not have enough information yet to say how many would end up with a smaller mortgage payment.
HAMP allows eligible borrowers to avoid foreclosure though loan modification to a level they can afford.
Acknowledging that some have questioned whether the program could just push problems into the future for some borrowers who may be unable to pay even under relaxed terms, Genworth's chief financial officer said he was optimistic that the program will help.
"The way we look at our book, we say we think there is about 40% to 50% for the eligible delinquency population that could qualify for HAMP, and that is a pretty big number" said Patrick Kelleher, Genworth's chief financial officer. He said some critics of the program say they expect a 50% re-default rate in the program.
"I think they have got to think about it differently," he said. Even if the program helps only 50% of the potential population, the benefits would potentially be "very large," he said.
Another program that Schneider said could help is the Housing Assistance and Recovery Program, or HARP, which allows non-profits to acquire homes of eligible foreclosed homeowners and lease them back to the borrower.
Shares of Genworth surged after it reported better-than-expected third-quarter earnings after the market close Thursday. It briefly helped pull up share prices for some other mortgage insurers.
Genworth was up 5.3% recently to $10.72. Radian Group Inc. (RDN) traded up 0.8% recently, but shares of PMI Group Inc. (PMI) and MGIC Investment Corp. (MTG) were both down, after trading higher earlier in the day.
For the latest quarter, Genworth reported a profit of $19 million, or 4 cents a share, compared with a year-earlier loss of $258 million, or 60 cents a share. Operating earnings, which excludes investment gains and losses, fell to 24 cents from 51 cents.
Analysts' estimates were for an operating loss of 2 cents on revenue of $2.52 billion, according to a poll by Thomson Reuters.
The U.S. mortgage insurance business's loss narrowed, though delinquencies increased from the second quarter. Mortgage-insurance policies cover losses when borrowers default and lenders are unable to recover their losses.
-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; email@example.com