Defaults on Insured Mortgages Rise 31 Percent
February 29, 2008 - Defaults on privately insured U.S. mortgages rose 31 percent in January from the same period a year earlier, the 13th straight monthly increase, an industry report today showed.
Insured borrowers falling more than 60 days late on payments rose to 68,950 last month from 52,528 a year earlier, according to the Washington-based Mortgage Insurance Companies of America. Defaults last fell in December 2006.
The worst housing slump in a quarter-century has sent foreclosure rates soaring and saddled financial companies with at least $181 billion in asset writedowns and credit losses since the start of 2007, according to Bloomberg data. Mortgage insurers are scaling back coverage after a surge in claims pushed the top three companies into third-quarter losses.
“They were slow to hit the exit when they should have been running,” William Ryan, an analyst with Portales Partners LLC in New York, said in an interview. “Credit quality is going to continue to worsen and the industry needs to raise capital if they want to continue to grow.”
MGIC Investment Corp., the biggest mortgage insurer, No. 2 PMI Group Inc. and No. 3 Radian Group Inc. are at risk of downgrades to their claims-paying ability after losses drained capital, Fitch Ratings said on Feb. 25. Mortgage insurers reimburse lenders when borrowers don’t pay.
The Mortgage Insurance Companies of America data understate the total number of defaults as they are drawn from six of the seven biggest U.S. mortgage insurers, excluding non-member Radian.
High Foreclosures
Milwaukee-based MGIC (Mortgage Guaranty Insurance Corporation) said Feb. 7 it will cut sales in areas with high foreclosures. Four days later, Walnut Creek, California-based PMI said its domestic unit will stop writing new coverage for homebuyers who borrow more than 97 percent of their property’s value.
MGIC, PMI and Philadelphia-based Radian reported a combined $3.25 billion in losses in the third and fourth quarters. PMI delayed fourth-quarter results from Feb. 26, without setting a new date.
MGIC, which has dropped 74 percent in the last year, fell 21 cents, or 1.3 percent, to $15.75 at 9:32 a.m. in New York Stock Exchange composite trading. PMI was down 1.7 percent to $7.67 and Radian slipped 2.1 percent to $7.08. PMI and Radian have both declined at least 84 percent in the last 12 months.
American International Group Inc., the world’s largest insurer by assets, said yesterday its mortgage insurer had a $348 million fourth-quarter operating loss, compared with profit of $27 million a year earlier.
Defaults on Insured Mortgages Rise 31%, Report Shows
By Andrew Frye | Bloomberg