Magazine article American Banker

Insurers' Stability Still in Doubt as Nov. Defaults Up

Magazine article American Banker

Insurers' Stability Still in Doubt as Nov. Defaults Up

Article excerpt

With the soundness of mortgage insurance facing a test with few precedents, the industry finished the year on another down note as its trade group reported that defaults climbed once again in November.

Mortgage Insurance Companies of America said Monday that 60-day delinquencies on loans covered by its members rose 2.9% in November from the month before and 8.24% from the previous year, to 61,033. This was the highest level since January 2000, the earliest period for which data is available, the trade group said.

MGIC Investment Corp., the largest insurer ranked by policies in force, has said that performance continues to deteriorate since it posted startling claims costs for the third quarter. In late November, Curt S. Culver, the Milwaukee company's chief executive, said that MGIC expected its claim payments next year to be near the top of its previously estimated range of $1.2 billion to $1.5 billion.

In an interview in late November, Nandu Narayanan, the chief investment officer at Trident Investment Management LLC, said that conditions in mortgage insurance were "the equivalent of 10 Hurricane Katrinas hitting a company at the same time, and most of them couldn't survive it."

The month-to-month increase in defaults tracked by the trade group was lower in November than in October, when delinquencies rose 8.43%. Month-to-month numbers have been volatile - a 15% rise in June was succeeded by a 2.7% drop in July and higher delinquencies thereafter. Jeff Lubar, a spokesman for the trade group, would not explain the volatility.

"The numbers are the numbers, and they're slowing," he said.

The rate at which privately insured mortgages recovered from delinquency status rose in November. Cures of 37,137 loans offset 60.8% of the delinquencies, 4.7 percentage points better than in October. But the November number was still 14.8 percentage points lower than the year earlier. …

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