In March, Bank of America announced a program that would reduce principal by as much as 30 percent for some homeowners who are underwater with their mortgage loan. This should reduce the number of foreclosures and the stress on mortgage insurers, predicts Laura Goldman of LSG Capital.
“Due to the precipitous decline in home prices, mortgage insurers have been lagging [behind] the market,” Goldman says. “A mortgage insurer is on the hook to pay a claim when a property goes into foreclosure.” This is important if other lenders follow suit. Among publicly held pure mortgage insurers, Goldman favors PMI Group (NYSE: PMI; price: $7.16) and Radian Group (NYSE: RDN; price: $16.48) and likes MGIC Investment Corp. (NYSE: MTG; price: $11.87). She’s also keen on mortgage bond insurer MBIA (NYSE: MBIA; price: $7.71).