The mortgage  insurance industry has suffered horrific losses and is quickly losing ground in a struggle for survival. Triad announced that it will cease insuring new loans.  The three major mortgage insurers (MTG, PMI, RDN) have been downgraded below AA, the minimum rating required by the GSEs (Fannie Mae and Freddie Mac).  The GSEs are allowing the MI’s to continue insuring their loans, based on plans submitted by each company detailing how they will restore a AA rating.  These plans are becoming harder to execute. Despite holding over $18 billion in cash and investments(including reserves), market capitalization for the three companies has fallen from $15 billion one year ago to $1.2 billion today.  It is next to impossible for  the MI companies to raise significant new equity at these prices.  Long term debt has also become very expensive. Credit default swaps on Radian debt are now priced at junk bond levels.

Tags: business