Magazine article American Banker

1Q Earnings: MGIC 'Hunkering' as Loss Narrows; Thoughts on FHA

Magazine article American Banker

1Q Earnings: MGIC 'Hunkering' as Loss Narrows; Thoughts on FHA

Article excerpt

MGIC Investment Corp.s net loss narrowed significantly in the first quarter from the previous quarter, and the nations largest private mortgage insurer said it remained focused on stabilizing its business.

What you are seeing, certainly from our company, and I would say the industry, is that we are hunkering down, and we are going to grow but on a profitable basis, Curt Culver, the Milwaukee companys chief executive, said on a conference call Thursday. It is back to underwriting 101, back where we are in charge of underwriting our own product. You are seeing a real return to credit quality, lower LTVs, full documented loans, high FICO scores.

The company also discussed the potential impact of a bailout in which borrowers would get reductions in loan balances on mortgages that now are larger than homes market values, then be refinanced into government-insured loans. And it discussed the consequences of a recent downgrading of its insurer financial strength rating by Standard and Poors Corp., to A.

On March 31, 7.68% of the loans MGIC covered were delinquent, 23 basis points higher than on Dec. 31. But the deterioration was less than the 82-basis-point fourth-quarter rise. Mr. Culver said that mortgage insurers have historically benefited in the first quarter from tax refunds that help borrowers make payments.

The company reiterated its forecast that it would pay $1.8 billion to $2 billion of claims this year.

Though reduced loan balances under proposals to expand the Federal Housing Administration insurance program would not result in a claimable event, Mr. …

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