American International Group Inc (AIG), Genworth Financial Inc (GNW), Radian Group Inc (RDN): Why Private Mortgage Insurers Are Raking in the Dough

3. Steady as we go
The housing market is a huge factor in the overall recovery of not just the economy, but also the private mortgage insurance market. With a positive trend in new home sales — like last month’s 6.5% increase in sales of existing homes, a four-year high — as well as the steady increase in home prices, mortgage insurance is seeing higher demand. Since mortgage insurance is required on loans with low down payments, continued increases in home prices may drive new insurance growth for the private firms.

Since the housing recovery has been slow but steady, and there are still constraints on the recovery because of a low inventory of available houses, a big upside remains for the PMI market as buyers continue to return to the market.

Summing it up
Though private mortgage insurers had a tough go of it for the past few years, and some remain in the red as far as earnings go, the tides have turned and more business is slowly moving their way. While some of the insurers mentioned above specialize in mortgage guaranty, others are more diversified and offer investors a wider opportunity if you’re still weary of mortgage insurance after the financial crisis. But knowing the three big factors driving the recent hot streak can help build a solid foundation for more confidence in the business. 

The article 3 Reasons Private Mortgage Insurers Are Raking in the Dough originally appeared on Fool.com.

Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: long January 2014 $25 calls on American International Group. 

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