Fitch Downgrades PMI, MGIC

Posted by Orb Staff on March 20, 2009 No Comments
Categories : Residential Mortgage

Fitch Ratings has downgraded independent mortgage insurance companies MGIC Investment Corp. and The PMI Group Inc., as well as their subsidiaries.

Both companies' ratings have also been removed from Rating Watch Negative and given a negative rating outlook, according to Fitch. The rating actions taken reflect the loss expectations and capital constraints facing firms in the independent mortgage insurance field.

PMI has extremely limited access to the capital markets and, as a result, will largely have to rely on current capital resources to satisfy ongoing mortgage insurance claims, Fitch says.

The rating agency adds that MGIC has few remaining assets that could be monetized to increase its capital resources (as the company did in 2008 with the sale of its interest in Sherman Financial LLC) and will largely have to rely on current capital resources to satisfy ongoing mortgage insurance claims.

The mortgage insurance industry faces continuing challenges, including rising unemployment, home price depreciation and limited access to refinancing options for homeowners, which, in turn, have contributed to rising delinquencies and losses within insured portfolios. Fitch expects that the mortgage insurance industry will continue to face a challenging operating environment for the foreseeable future.

Fitch recognizes the possibility of a stabilizing impact from the various initiatives by the U.S. government to reduce stresses in the U.S. housing market; however, the timing and impact of any such initiatives remains uncertain.

SOURCE Fitch Ratings

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