not good but not quite so bad either....
UPDATE: Mortgage Insurer PMI Reports 12th Straight Loss
Thursday 07/29/2010 10:30 AM ET - Dow Jones News
By Erik Holm
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Mortgage insurer PMI Group Inc. reported its 12th consecutive quarterly loss on Thursday, even as the number of defaulting homeowners on its books dropped.
The second-quarter loss of $150.6 million was smaller than a year ago because of falling claims expenses at its U.S. mortgage insurance unit. But those claims still cost twice as much as PMI collected in premiums as the firm struggled against declining demand for its services.
PMI and other mortgage insurers have been reviewing the mountains of claims on policies they sold in 2008 and earlier for signs of false or incomplete information that would give them grounds to refuse payment. But PMI warned the effort wasn't as successful in the first half of the year as it had hoped, and it reduced its estimate for future savings from these so-called rescissions.
Losses have been par for the course for mortgage insurers over much of the past three years. The coverage they sell protects lenders when homeowners default, and those homeowners have defaulted at record rates as home prices crashed and unemployment soared. But last week, larger rival MGIC Investment Corp. (MTG) reported its first profit in almost three years, an announcement that breathed life into its moribund shares.
PMI moved in the opposite direction Thursday. The stock fell 12% to $3.35 in morning trading. It traded above $50 before losses started to mount in 2007.
PMI and MGIC both have reported a decline in the number of defaults on their books this year as fewer homeowners fall behind, and the ones who were behind find ways to come current -- either through a government program designed to reduce foreclosure or of their own accord.
But MGIC sounded a note of caution even as it reported its profitable second quarter, warning that the mortgage insurance business can be seasonal, and the costliest part of the year may still lie ahead. Company executives also warned the federal program to help homeowners keep their houses has probably peaked, meaning future quarters may not see as many loan modifications.
Mortgage insurers raised their prices and tightened their underwriting standards in 2008 to prevent more losses, but home sales have dropped from their peaks and the U.S.'s Federal Housing Administration has taken a greater share of the mortgage insurance market. Both factors have made it harder for private mortgage insurers to offset the money-losing policies from earlier years with the profitable policies of later years.
For PMI, that translated into a 36% decline in revenue in the second quarter.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
(Nathan Becker contributed to this article.)
