The PMI Group Inc.'s (PMI) principal operating subsidiary, PMI Mortgage Insurance Co. (MIC), says Fannie Mae has approved PMI Mortgage Assurance Co. (PMAC) as a direct issuer of mortgage guaranty insurance.
PMAC is an existing subsidiary of MIC. Pursuant to Fannie Mae's approval, PMAC may write new mortgage insurance business, if any, in 16 states in the event MIC is required to cease writing new mortgage insurance business due to its financial condition, including its inability to meet regulatory capital requirements applicable to mortgage insurers, the company says. Fannie Mae's approval is subject to certain conditions and restrictions, including a limitation on PMAC's new business volumes, and will remain in effect until Dec. 31, 2011.
‘Fannie Mae's approval of PMAC as an eligible mortgage insurer is an important step in our strategy of continuing to support our customers and the mortgage markets by continuing to write new mortgage insurance business throughout the U.S.," says L. Stephen Smith, chairman and CEO of PMI.
PMI expects that PMAC, following certain internal restructuring and capital initiatives, including a $10 million investment from MIC, will hold approximately $28 million of capital. If necessary, PMAC will insure new loans under the same policy terms and conditions as MIC, and will contract with MIC to provide it with sales, operational and other support services. PMAC is also in negotiations with Freddie Mac about becoming an eligible insurer under Freddie Mac's guidelines.
Separately, PMI has also announced that the Arizona Department of Insurance, MIC's primary state regulator, "exercised discretion to permit MIC to continue writing new mortgage insurance business" in the event it falls below Arizona's capital requirements.
The department's waiver, which may be withdrawn at any time if warranted, also remains in effect until Dec. 31, 2011.
The department issued the waiver following an examination of PMI's operations, financial condition, capital/liquidity position, and its present and future business prospects. In the letter granting the waiver, the department concluded that MIC currently has sufficient capital and resources to fulfill its current and projected policyholder obligations.
‘The department's action reflects the importance for MIC to continue to write new mortgage insurance in support of the U.S. housing recovery and affirms our view that MIC has the financial resources to pay its policyholder obligations during a very challenging economic environment," Smith says.
SOURCE: PMI Mortgage Insurance Co.