MGIC Investment Corp. (MTG) announced Fannie Mae (FNM) has
approved its plan to recapitalize its mortgage-guaranty unit so it
could continue writing new policies.
The news came as the company said its third-quarter loss widened
sharply on higher claims and a prior-year reserve change as the
mortgage insurer continued to struggle amid a massive restructuring
effort.
MGIC, which last summer outlined a $1 billion recapitalization
of the mortgage-guaranty unit, has been waiting for the business to
be approved as an eligible mortgage insurer for Fannie Mae (FNM)
and Freddie Mac (FRE). MGIC Chairman and Chief Executive Curt
Culver said Freddie approval is hoped to happen soon. Also needed
is approval from Wisconsin's insurance commissioner.
MGIC is shifting its underwriting to the new unit on fears MGIC
won't meet regulatory capital requirements to write new
business.
Mortgage insurers have seen claims skyrocket for more than a
year as the credit crunch made it more difficult for borrowers to
refinance and for lenders to resell foreclosed properties at a
profit.
MGIC posted a third-quarter loss of $517.8 million, or $4.17 a
share, compared with a year-earlier loss of $115.4 million, or 93
cents a share. Revenue fell 10% to $413.3 million as net premiums
earned dropped 14% amid a 53% slump in new policies written.
Analysts polled by Thomson Reuters forecast a per-share loss of
$1.62 and revenue of $437 million.
Delinquency rates among insured loans increased to 16.9% from
10.2% a year ago and 15% in the second quarter. Paid claims rose to
$417 million from $330 million and $380 million, respectively.
MGIC's shares closed Thursday at $7.32 and were inactive
premarket. The stock has more than doubled the past three months as
investors become optimistic the housing crisis has bottomed.
-By Melissa Korn and Kevin Kingsbury, Dow Jones Newswires;
kevin.kingsbury@dowjones.com; 212-416-2354