MGIC Investment has been the victim of negative headlines since writing down its joint venture, mortgage securitization and servicing company C-Bass. The company followed it up by calling off a potential merger with fellow mortgage insurer Radian Group, and it most recently announced $602.3 million in third-quarter losses. But mortgage resets and delinquencies are not all bad news for the company, whose lending model may benefit from the subprime mess as borrowers face decreased financing alternatives.
"Mortgage insurers refer to right now as the onset of the golden age, which is interesting because it looks a lot like the apocalypse," said James Brender, a director at Standard and Poor's. However, currently there is tremendous demand for mortgage insurance with the majority of loans being done through the GSE channel, Brender said. "There are still a lot of borrowers out there who are credit worthy and want to buy a house but do not have 20% to put down. So since banks do not want to do second liens, and GSEs do not want to take a loan that does not have 20% down without mortgage insurance, mortgage insurance becomes a valued product." At the same time, the current market environment is also supporting better pricing, better persistency and fewer mortgage insurance avoidance products than have previously been seen, said Ralph Aurora senior director at Fitch Ratings.