NU Online News Service, Aug. 9, 2:04 p.m.EDT

Troubles experienced by some mortgage insurers couldpresent opportunities for better-capitalized competitors, but thosecompanies will have to demonstrate the ability to maintainregulatory compliance, Moody's says.

In its Weekly Credit Outlook, Moody's points to theworse-than-expected results reported by PMI Mortgage Insurance Company, which recently stated that itspolicyholders' position is now $320.3 million below the minimumrequired by Arizona law. The company says the Arizona departmenthas not yet limited its ability to transact new insurance business,but that the department may issue an administrative order requiringthe company to suspend writing new business in all states.

Moody's also cites troubles at Republic Mortgage InsuranceCompany (RMIC), noting that the company's regulator is unwilling toallow it to write new business, and that the company's parent, OldRepublic International Corporation, will not contribute additionalcapital to help RMIC. Additionally, Moody's says RMIC's two majorcounterparties, government-sponsored entities Fannie Mae andFreddie Mac, say the company is no longer an approve insurer.

Both companies, Moody's notes, have "benefited from theirregulators' and the GSEs' forbearance" despite having breachedregulatory capital thresholds. "Without forbearance, and in thecase of RMIC, without parental support, we believe the companiesare at greater risk of failing to meet all claims in a run-offscenario," Moody's states.

Regarding competitors, Moody's says, "While the run-off of RMICand PMI may present more opportunities for their better-capitalizedpeers, the ability to maintain regulatory compliance and GSEeligibility is clearly critical to taking advantage of thoseopportunities."

The rating agency cites United Guaranty Residential InsuranceCompany and new-entrant Essent Guaranty as two competitors that maybe able to benefit from their peers' struggles.