History of PrivateMI
How the Private Mortgage Insurance Industry Began
The industry got its start in 1957 when a Milwaukee lawyer named Max Karl founded Mortgage Guaranty Insurance Corp, the first modern private mortgage insurance company.
Karl, the child of Russian immigrants who ran a grocery store, worked his way through college and eventually became a real estate lawyer in Milwaukee, Wisconsin. By 1950, he realized that mortgage lenders and home builders had become disenchanted with the Federal Housing Administration which at the time was the only organization insuring low down payment mortgage loans. The agency was snarled in red tape and imposed ceilings on mortgage interest rates that made those mortgages less attractive than conventional mortgages. As a result, lenders were increasingly turning away from the FHA-insured loans and toward conventional mortgages requiring large down payments. It was getting tougher for people of moderate income to buy homes.
Mr. Karl saw the opportunity and formed a company to insure low down payment mortgages against foreclosure. He thought he could compete with the Federal Housing Administration, which had a near monopoly in this area, by insuring low down payment mortgages at half the cost of FHA insurance, and approving the insurance within a day or two, compared to the 4-8 weeks FHA approvals required.
The company got its license to operate in Wisconsin in February of 1957. The next month it insured four home mortgages. With Wisconsin as a model, state regulatory structures for the private mortgage insurance industry were established to safeguard the industry and those who depended upon it. A unique contingency reserve structure and capital requirements were established to recognize the catastrophic nature of mortgage default risk and prevent companies from entering the business without long-term commitments.
This regulatory structure laid the foundation for the establishment of additional private mortgage insurance companies.
Over the years, the industry has thrived by achieving its goal of enabling people to buy homes sooner, for less money down. Since its modest beginnings, private mortgage insurance has helped 25 million American families to buy a home sooner, for less money down.