NEW YORK (Bloomberg) - Essent Group Ltd., the mortgage guarantor backed by JPMorgan Chase & Co. and Goldman Sachs Group Inc., will capitalise on a housing-market rebound and tighter standards instituted by money-losing rivals, said Mark Casale, the insurer's CEO.

Essent, which said on Friday that government-owned mortgage companies agreed to take the loans it insures, joins the industry after competitors have recorded two years of losses on loans they backed before standards improved. Essent plans to begin selling policies in the second quarter, Mr. Casale said on Friday in an interview.

"We feel like the market is starting to turn around," Mr. Casale said. "Our timing is actually very good," he said. "Guidelines are tighter, underwriting has been much better over the last couple of years. We believe it is going to be a very good market."

Essent secured $500 million in equity financing from investors including Goldman Sachs, JPMorgan, private equity firm Pine Brook Road Partners, and Bermuda-based reinsurers PartnerRe Ltd. and RenaissanceRe Holdings Ltd. Fannie Mae and Freddie Mac approved Essent to back loans that lenders plan to place with the government-owned mortgage companies, the Radnor, Pennsylvania-based guarantor said in a statement on Friday.

"We are bringing a fresh, clean balance sheet, substantial capital with our investors," Mr. Casale said. "Bringing in new capital to the market will actually reinvigorate the private mortgage insurance industry."

Mortgage insurers, led by MGIC Investment Corp., Radian Group Inc. and PMI Group Inc., pay lenders when homeowners default and foreclosure fails to recoup costs, and is typically required when the homeowner takes out a mortgage for more than 80 percent of the value of the house. The industry has tightened underwriting standards and raised prices to recover from a streak of losses that began in 2007.

"Essent's entry comes at a time of real need in the market for mortgage insurance capacity," said Daniel Kelly, director of mortgage insurer relations at Freddie Mac, in the Essent statement.

Mr. Casale is the former president of Radian's main insurance subsidiary. Radian, the second-largest mortgage insurer in the US, lost about $2 billion in the nine quarters ended September 30.

The Philadelphia-based company has not reported results for the last three months of 2009.

Last year there were 2.82 million foreclosures, according to RealtyTrac Inc. More than 4.5 million filings are expected this year, including default or auction notices and bank seizures, the Irving, California-based seller of default information said last month.

Sales of existing US homes climbed 14 percent in the fourth quarter from the third, the Chicago-based National Association of Realtors said on February 11. Housing starts in the US rose in January to 591,000 homes at an annual rate, up 2.8 percent from December, the Commerce Department said yesterday.

MGIC, the largest US mortgage insurer, and No.3 PMI reported their 10th straight quarterly loss for the last three months of 2009. Milwaukee-based MGIC said new delinquencies had dropped 8.5 percent in the fourth quarter to 61,114 from the prior three months as fresh notices of potential defaults in California and Florida abated.

That Essent could attract investors amid the housing decline signals "there's actually real money to be made in this sector," David Katkov, chief business officer at PMI, said in an interview in December. "It's a great thing to happen to the sector."

Radian CEO Sanford Ibrahim said Essent's successful effort to raise money from investors "bodes well" for existing insurers. Radian and its rivals "already have the investment and the infrastructure, the proven credit track record of doing business, the proven customer relationships", he said in an interview in November. "We just have to address legacy issues."

Until 2007, private mortgage policies had been among the most profitable types of coverage sold by property and casualty insurers. From 2004 to 2006, members of the Mortgage Insurance Companies of America reported a profit margin of at least 35 cents for every dollar they collected in premiums. Auto insurers made less than five cents on every dollar in 2006, according to AM Best Co.