The proportion will keep rising as home prices appreciate and their main competitor, the Federal Housing Administration (FHA), charges higher premiums, analysts and executives said. Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. Typically, coverage is required when homeowners make a downpayment of less than 20 percent on a property. Companies such as Genworth Financial Inc (GNW.N) and Old Republic International Corp (ORI.N), as well as Radian and MGIC, were left nursing losses after selling billions sites of dollars of low-priced policies before the market crashed in 2008. As a result, the FHA’s share of mortgage insurance ballooned to a high of around 70 percent in 2009, according to specialist publication Inside Mortgage Finance. But the agency’s share has been falling as it has reduced its market exposure and raised premiums to replenish dwindling cash reserves.
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Housing Market: 5 Years Later

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Someone who is 5% underwater in an environment of falling home prices might be discouraged and more likely to walk away from a mortgage; if they are underwater but home prices are rising, they are more likely to stick it out, says Kolko. The importance of homeownership has faded over the last five years as consumers shy away from the idea that real estate is a sound investment. Newport says the homeownership rate shot up in 2005 to 69%, and is now around 65%. He expects the rate to fall to levels not seen since the 1960s.
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