Mortgage Insurers Back Away From Speculators

In what could be bad news for housing speculators, two private mortgage insurers have announced they will quit insuring buyers with "risk exposure". PMI Mortgage Insurance Co. and MGIC Mortgage Insurance Corp. are limiting the number of policies per person and are putting caps on the amounts insured.

Kevin Harney writes, "The problem, say insurers and others in the mortgage industry, is that when property appreciation rates decline in the hottest markets, speculators are likely to be stuck with properties they can't sell at the prices they need. Negative cash flows are then likely to push them into default."

Of course actions like this could tip the housing markets lower as many speculators need the insurance to qualify for the loan.