Moody’s: Mortgage Insurers’ Troubles Could Boost Competitors

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

Troubles experienced by some mortgage insurers could present opportunities for better-capitalized competitors, but those companies will have to demonstrate the ability to maintain regulatory compliance, Moody's says.

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

Moody's also cites troubles at Republic Mortgage Insurance Company (RMIC), noting that the company's regulator is unwilling to allow it to write new business, and that the company's parent, Old Republic International Corporation, will not contribute additional capital to help RMIC. Additionally, Moody's says RMIC's two major counterparties, government-sponsored entities Fannie Mae and Freddie Mac, say the company is no longer an approve insurer.

Both companies, Moody's notes, have "benefited from their regulators' and the GSEs' forbearance" despite having breached regulatory capital thresholds. "Without forbearance, and in the case of RMIC, without parental support, we believe the companies are at greater risk of failing to meet all claims in a run-off scenario," Moody's states.

Regarding competitors, Moody's says, "While the run-off of RMIC and PMI may present more opportunities for their better-capitalized peers, the ability to maintain regulatory compliance and GSE eligibility is clearly critical to taking advantage of those opportunities."

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