Red ink sinking PMI companies

November 9th, 2007 at 12:58pm Alex Gary

Everyone who has to pay a PMI — a small monthly fee required for the vast majority of homeowners who have less than 20 percent equity in their houses — probably wonders why they have to pay it in the first place.

Well, the companies that issue the insurance are real, do serve a purpose and, according to an Associated Press story, are starting to drown in red ink thanks to the record number of foreclosures being filed nationally.

Emily Fredrix wrote that the PMI industry leader, MGIC Investment Corp. of Milwaukee is saying it won’t turn a profit for at least a year. That’s a remarkable drop considering the company had $1.5 billion in revenue in 2006 and a profit of nearly $565 million, according to Hoovers.com.

Fredrix wrote that PMI Group Inc. saw its U.S. claims this quarter rise 49 percent to $92.6 million from the same quarter last year and Radian Group Inc. posted a loss of $703.9 million in the third quarter because of writedowns and losses through subprime mortgage joint venture.

It would be big trouble if the private mortgage insurers run out of money. The Mortgage Insurance Companies of America reported there was about $776 billion in private mortgage insurance in place as of September, or about 10 percent of the total loan market.

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