“PMI Suspended by State Regulators”
The article below addresses the suspension of PMI Group Insurance Units. A major conventional mortgage insurance company. Not sure PMI will survive.
Short term, this event probably won’t have any effect, however long term, not so sure. Any time there is less competition, there will a natural tendency to rates to rise. I believe, that is what will happen here.
Over the past few months, monthly mortgage insurance rates have dropped, which helps each and every family buying or refinancing a home. In the future rates will probably move upward, as a result of this player being out of the market, at least for now.
After threatening to shut down mortgage insurance operations at The PMI Group, Inc., the Arizona Department of Insurance made good by issuing an order that forced the company to cease writing new mortgage policies, effective Friday. PMI Mortgage Insurance Co. (PIC), the division responsible for mortgage insurance, shut down two of its units in response.
Christina Urias, director of the department, released the order Friday, explaining in the state document that the “[o]rder requires PMI and PIC to cease writing new mortgage commitments in all states.” It went on to add that the department “permits the issuance of new mortgage insurance policies under pending commitments” through September 16.
“The company must submit a plan of action within 60 days,” Erin Klug, a spokesperson, tells MReport. “We will evaluate that and go from there. It remains to be seen what the next steps will be,” she says.
She adds that the department has “been monitoring PMI for some time,” given “the mortgage industry’s special considerations.”
According to the order, the department made its decision on a series of losses experienced by PMI since the Great Recession.
A June 30 financial statement signaling a $329-million net loss, coupled with $574 million in incurred losses, alerted the department to approximately $320 million in policy holder deficits and prompted the suspension of mortgage-writing practices, according to the order.
The department’s insurance division continues to “constantly” monitor every insurance company licensed in the state of Arizona, according to Klug.
“We have a variety of analysts that look at their quarterly and annual financial statements,” she says. “If any of the information suggests that the company deserves scrutiny, we take whatever measures necessary to make sure the company is on solid ground.”
The troubles started sometime ago for PMI. A Wall Street Journal story published early August revealed that PMI knew then that state regulators could prohibit it from making new coverage policies available to mortgage lenders.
According to the Journal, PMI has sustained $3 billion in losses since the fourth quarter.
Reflecting renewed worries over the mortgage insurance giant, PMI posted stocks that fell 31.83 percent Monday, with shares tying off at fewer than 3 cents by end of day. This marks the second consecutive time that shares dropped below $1, the minimum requirement for listing on the New York Stock Exchange, according to the Associated Press.
The news service reported Friday that PMI needed to once more comply with state requirements or face de-listing procedures by the next annual meeting.
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