Top Private Mortgage Insurers are starting to feel the pinch from the recent spate of defaults in the mortgage industry. Companies such as MGIC are losing money as payouts surge and do not expect to see profitability until 2009.
While it will be a tougher road for the PMI companies, this is the role that they play in the industry. They allow banks to make loans at a higher level than their regulators would normally approve with the understanding that private mortgage insurance will shoulder the load when loans go bad.
And homeowners have the knowledge that this insurance in place if problems occur in their world. Now is just the time the piper gets paid.
If the insurers do run into trouble, the risks for the industry are huge. About 10 percent of the total loan market has private mortgage insurance, according to the Mortgage Insurance Companies of America. There was $776 billion in private mortgage insurance in force as of September, the trade group reported.
MGIC, which has $196.6 billion in policies written, is confident it can pay even though it figures it won’t return to profitability until at least 2009. So far this year, MGIC has paid out $586 million in claims and expects to pay out $875 million for the full year.
Next year, claim payouts are expected to rise to between $1.2 billion and $1.5 billion, roughly doubling the $611 million paid in losses in 2006.
”These are big numbers,” said Michael Zimmerman, vice president of investor relations. ”Obviously we’ll pay out large numbers, but we’re receiving money at the same time. We don’t anticipate losing a billion dollars.” via SearchChicago
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what do you expect from the economic crisis..
its because of the mortgage downfall due to the economic crisis..
so true..hate that economic crisis..
thanks for the post..this is such a mortgage problem..hate it..