S&P Places Mortgage Insurers on CreditWatch As Data Dips
Results suggest delinquencies moving into prime mortgages faster than expected.
Standard & Poor’s Ratings Services has placed its ratings on several U.S. mortgage insurance groups on CreditWatch with negative implications. These groups are Old Republic, PMI, Radian, Genworth, United Guaranty, CMG Mortgage (CMG), and California Housing Loan Insurance Fund (CAHLIF). S&P had already downgraded Mortgage Guaranty Insurance Corp (MGIC) to B+ /Negative Outlook on Oct. 19. 2009. Pending the outcome of the ratings watch Republic remains the only A-rated insurer (at A-/Watch Negative).
“The CreditWatch placements reflect our view that macroeconomic conditions may have become more difficult for the mortgage insurers since we last conducted an extensive review of the sector in April,” said Standard & Poor’s credit analyst Ron Joas. At that time, we expected that mortgage insurers were likely to report losses through 2010 and possibly into 2011.
However, we also expected some mitigation of losses beginning in the second half of 2009 and continuing into 2010.”
We believe recent results from MGIC and Old Republic International Corp.’s (ORI) mortgage insurance group may be indicative of an elongation of the loss cycle, and that mortgage insurers are experiencing a sharper and more rapid transition of delinquencies into prime books of business than we expected.
“The CreditWatch placements also reflect our expectation that those mortgage insurers that have not already reported their third-quarter earnings are likely to report lower results than our forecasts, reflecting this deterioration.”
MGIC reported a loss ratio of 331% for the third quarter, compared with a loss ratio of 222% in the second quarter of 2009, owing to a significant increase in the delinquent loan inventory caused by, in part, a sharp transition of delinquencies into prime loans. Similarly, ORI’s mortgage segment reported an increase in its loss ratio to 214% for the third quarter, up from 198% in the second quarter of 2009, because of an increase in delinquency rates.
“Claims payments remain below our expectations as a result of the backlog of foreclosures and the moratoria that had been implemented earlier in the year.”
For details see: Research Update: Ratings On Several U.S. Mortgage Insurers Placed On Watch Negative; Loss Results Exceeding Expectations
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