MILWAUKEE, April 17, 2015 /PRNewswire/ -- Today the
Federal Housing Finance Agency (FHFA) released the final version of
the private mortgage insurer eligibility requirements (PMIERs) that
Fannie Mae and Freddie Mac (GSEs) will use to approve private
mortgage insurers that provide mortgage insurance on loans acquired
by the GSEs. The effective date of the PMIERs is December 31, 2015 and mortgage insurers are
required to certify that they are in compliance with the PMIERs by
March 1, 2016. The PMIERs
require that an insurer have "Available Assets" (generally, only
the most liquid assets of an insurer) equal to or greater than
"Minimum Required Assets" (which are calculated from tables of
factors with several risk dimensions and are subject to a floor
amount).
We expect that Mortgage Guaranty Insurance Company (MGIC), which
is the principal subsidiary of MGIC Investment Corporation (MTG),
will be in compliance with the PMIERs, including their revised
financial requirements, when they become effective.
We estimate that as of March 31,
2015, MGIC's Available Assets are approximately $5.12 billion and its Minimum Required Assets are
approximately $5.35 billion,
resulting in a shortfall of approximately $230 million. Our shortfall estimates are
based on our interpretation of the PMIERS and assume that the risk
in force and assets of MGIC's MIC subsidiary will be repatriated to
MGIC. Our shortfall estimates do not include any benefits
from MGIC's existing reinsurance transaction or the anticipated
restructure of the existing reinsurance transaction, capital
contributions from MTG to MGIC, or the transfer of other assets
(including the $45 million referenced
to below) from regulated insurance affiliates of MGIC that subject
to regulatory approval could increase the Available Assets of MGIC,
each of which is discussed below.
As we have previously disclosed, we would not have received full
credit under the PMIERs for our existing reinsurance transaction.
Therefore, we have reached agreement to restructure that
transaction in a way that we believe will result in MGIC receiving
the maximum benefit under the PMIERs. The effectiveness of
this restructured transaction will be subject to approval by the
Wisconsin Office of the Commissioner of Insurance and the
GSEs. In addition, in April
2015, we received regulatory approval to transfer
$45 million of assets from regulated
insurance affiliates of MGIC that will increase the Available
Assets of MGIC. Furthermore, we believe a portion of MTG's
$491 million of cash and investments
at December 31, 2014, may be
available for future contribution to MGIC.
Patrick Sinks, CEO of MGIC and
MTG, said, "We have worked hard to incorporate into our business
model lessons learned from the financial crisis. Hence, we
embrace robust risk adjusted capital requirements and support the
goal of modernizing the GSEs' private mortgage insurance
eligibility requirements. I am pleased that the eligibility
requirements, including their financial requirements, have been
finalized." He added that, "given the conservative nature of
the financial requirements, it is now time to accelerate the
discussions regarding proposals that would allow private mortgage
insurers to further reduce the risk the GSEs (and taxpayers)
currently take. Furthermore we believe that these proposals
could also improve access to credit and reduce homeownership costs
for consumers."
The foregoing description of the PMIERs that accompanied them is
only a summary and is subject to and qualified by the text of the
actual documents, which are available on the FHFA's website
(www.fhfa.gov).
Forward Looking Statements
This press release contains forward looking statements. Among
others, statements regarding the potential impact of the PMIERs or
alternatives that MGIC could pursue to achieve compliance with the
PMIERs, and statements that include words such as "believe,"
"anticipate," "will" or "expect," or words of similar import, are
forward looking statements. We are not undertaking any obligation
to update any forward looking statements or other statements we may
make even though these statements may be affected by events or
circumstances occurring after the forward looking statements or
other statements were made. No investor should rely on the fact
that such statements are current at any time other than the time at
which this press release was issued. Factors that may negatively
impact MGIC's ability to comply with the GSE Financial Requirements
on their effective date include the following:
- The GSEs may not approve our restructured reinsurance
transaction or they may not allow full credit under the financial
requirements in the PMIERs for our restructured reinsurance
transaction.
- We may not obtain regulatory approval to transfer assets from
MIC to MGIC to the extent we are assuming because regulators
project higher losses than we project or require a level of capital
be maintained in MIC higher than we are assuming.
- MGIC may not receive additional capital contributions from our
holding company due to competing demands on the holding company
resources, including for repayment of debt.
- Our future operating results may be negatively impacted by the
matters discussed in our risk factors, the location of which is
described below. Such matters could decrease our revenues, increase
our losses or require the use of assets, thereby increasing our
shortfall in Available Assets.
For a more detailed description of the last factor listed in the
bullet points above, you should refer to the Risk Factors detailed
in our Annual Report on Form 10‑K filed with the SEC on
February 27, 2015.
About MGIC
MGIC (www.mgic.com), the principal subsidiary of MGIC Investment
Corporation, is a private mortgage insurer with $164.9 billion primary insurance in force
covering approximately one million mortgages as of December 31, 2014. MGIC serves lenders
throughout the United States,
Puerto Rico, and other locations
helping families achieve homeownership sooner by making affordable
low-down-payment mortgages a reality.
From time to time MGIC Investment Corporation releases important
information via postings on its corporate website without making
any other disclosure and intends to continue to do so in the
future. Investors and other interested parties are encouraged to
enroll to receive automatic email alerts and Really Simple
Syndication (RSS) feeds regarding new postings. Enrollment
information can be found at http://mtg.mgic.com under Investor
Information.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mgic-comments-on-gse-private-mortgage-insurer-eligibility-requirements-300068035.html
SOURCE MGIC Investment Corporation