Magazine article American Banker

MGIC Hedges on Delinquency Projection

Magazine article American Banker

MGIC Hedges on Delinquency Projection

Article excerpt

Byline: Harry Terris

MGIC Investment Corp., the nation's largest private mortgage insurer, said Thursday that it expects to break even on the policies it wrote in the first quarter, but that profitability will improve and next year's crop of loans will be an "outstanding vintage."

The Milwaukee company reiterated its belief that delinquencies in its overall portfolio will peak this year, but it conceded that the peak might not come until the first quarter of next year.

MGIC said that its second-quarter loss almost tripled from the previous quarter, to $97.9 million. (It earned $76.7 million in the second quarter of last year.) Claims costs fell 0.5%, to $688.1 million, but a recovery recognized against reserves for a discontinued line of business shrank.

Curt S. Culver, MGIC's chairman and chief executive officer, reiterated its projection of $1.8 billion to $2 billion for paid claims this year.

However, "it now looks like we will be at the lower end of the range," he said on a conference call.

"The reality is that the pace of paids has been slowed due to various state and lender foreclosure moratoriums, servicing delays, fraud investigations, mitigation opportunities, and the lack of capacity of our court system."

Historically, MGIC has thought delinquencies would peak this year, Mr. Culver said. "Now whether or not that happens a quarter later or not, we think technically they'll peak this year. It may be a quarter later," he said. "Whether or not we have slowed the acceleration of delinquencies will be an event that we will see in the third and fourth quarters."

Mr. Culver said the policies written in the first quarter "will be the least profitable" of the ones written this year. "You still had an overhang of the '07 guidelines that we committed on, as a company and as an industry. …

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