MGIC, PMI Ratings Trimmed to A-Plus

By Terris, Harry | American Banker, June 9, 2008 | Go to article overview

MGIC, PMI Ratings Trimmed to A-Plus


Terris, Harry, American Banker


Fitch Inc. downgraded the financial-strength ratings of the U.S. mortgage insurance businesses at MGIC Investment Corp. and PMI Group Inc., to A-plus from AA, saying that 2007, a year of rapid growth for a number of key players, will likely prove to be one of the worst underwriting years in the modern history of the U.S. mortgage industry.

The move last week came after Standard and Poors Corp.s April downgrades of the two insurers to below the AA level that had been considered necessary to take on new business because of requirements by the government-sponsored enterprises that have recently been relaxed.

Fitch said the mortgage insurance industry aggressively courted new business throughout 2007 and is now heavily concentrated in loans made that year.

Meaningful changes to underwriting standards, from both a risk and pricing perspective, have only recently been instituted, Fitch said.

Its analysis took into account some degree of reduced losses because many potential claims on mortgage insurance policies may be determined to be ineligible to be paid.

Fitch said the new ratings also reflected the more than $800 million that MGIC of Milwaukee raised in March capital offerings and the options available to PMI of Walnut Creek, Calif. …

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