After posting a nearly $340 million loss in the second quarter, Milwaukee-based Mortgage Guaranty Insurance Corporation (MGIC) intends to infuse as much as $1 billion into an inactive subsidiary, which will allow the nation’s leading private mortgage insurance (PMI) provider to continue to offer coverage for homeowners. With eight consecutive quarters of no profitability, the intention is for the subsidiary to take control of policy sales as of January 1, 2010. However, MGIC must attain approval from state insurance regulators before this plan can come to fruition.
In the midst of the worst housing market since the Great Depression, the losses sustained by MGIC are due to the ever-increasing mortgage defaults. According to a recent Bloomberg report, Chief Executive Officer Curt Culver maintains that reactivating this unit, “would allow MGIC’s subsidiaries to continue to support the U.S. housing market.” Earlier, however, Culver forecasted that additional losses by the end of 2009 by MGIC’s other subsidiaries would thwart their effort to write new policies.
Back in April, Culver said that MGIC was probing state insurance regulators to relax some accounting standards. In addition, MGIC was attempting to persuade the federal government to grant them bailout money to keep them afloat. Over the past two years, a record number of homeowners have defaulted and ultimately foreclosed on their homes. When a mortgage insurer such as MGIC insures these homes, they face mounting losses. It has been estimated that MGIC has lost nearly $3 billion since the housing crisis began.
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Posts about Mortgage Market Report as of July 16, 2009 | Real Estate Market Reports
July 16, 2009 @ 12:39 pm
[...] lender if you default and they take a loss. MGIC (NYSE: MTG) is the largest issuer in this area. MGIC to Infuse Up To $1 Billion into Subsidiary – totalmortgage.com 07/16/2009 After posting a nearly $340 million loss in the second [...]