Moody's Investor Service this week went “negative” on the mortgage insurance industry, citing the sector's weak financials and calling its future “unclear.”
Previously, the rating agency had labeled the MI business “developing.”
In a new report the agency gives negative outlook ratings on two of the nation's top MIs: Mortgage Guaranty Insurance Corp. (MGIC), and Genworth Financial. Radian is currently being reviewed by Moody's for a possible downgrade and United Guaranty Inc. (UGI), is considered stable. (UGI is part of American International Group, which is majority owned by the U.S. government.)
In terms of new policies written MGIC, Radian, and Genworth rank first, second, and third respectively, according to figures compiled by National Mortgage News and the Quarterly Data Report.
“The mortgage insurers have been unable to mitigate losses from legacy vintages through new production, with volumes declining sharply during the 2007-09 financial crisis and remaining substantially lower than precrisis levels,” Moody's said.
Late Wednesday spokespersons for MGIC and Genworth could not be reached for comment. A spokeswoman for the Mortgage Insurance Companies of America did not return a telephone call.
Currently there are six MI firms left today writing new business. Earlier this year, PMI Group – until recently the nation's second largest MI – filed for bankruptcy protection.
During the financial crisis the MI industry has paid out upwards of $40 billion in claims – money that has benefited Fannie Mae and Freddie Mac, one MI executive told NMN.
The industry is hopeful that it has a bright future given calls by regulators for the GSEs to lay off some of their risk to MIs.