Delinquent Borrowers Catch Up on Insured Mortgages
In February, for the first time since March of 2006, mortgage cures topped new mortgage delinquencies.
By Andrew Frye
March 31 (Bloomberg) -- Borrowers who caught up on overdue mortgages outnumbered people who became newly delinquent on insured home loans for the first time in almost four years. PMI Group Inc. led mortgage insurers higher in New York trading.
In February, 68,675 homeowners with privately insured mortgages fell into default, compared with 80,758 who got back on track, a report today from the Washington-based Mortgage Insurance Companies of America said. In January, MICA reported 52,528 new defaults and 31,616 cures. The trade group last reported that recoveries exceeded defaults in March 2006.
“The significance is substantial, it’s enormous,” said Matthew Howlett, an analyst with Macquarie Group Ltd. Recoveries outpacing new defaults “signals a turning point” for mortgage insurers, he said.
MGIC Investment Corp., the biggest U.S. mortgage insurer, No. 2 Radian Group Inc. and No. 3 PMI are facing fewer claims as the economy recovers and the Obama administration works with the nation’s biggest banks to prevent foreclosures. Philadelphia- based Radian, which has reported three straight annual losses, said in February that delinquencies were slowing and may fall this year.
“We know there has been a slowdown in new defaults,” Radian Chief Financial Officer C. Robert Quint said on a Feb. 23 conference call with analysts and investors. “I actually expect it to be flat and slightly down throughout the year.”
PMI, based in Walnut Creek, California, rose 88 cents, or 19 percent, to $5.42 in New York Stock Exchange composite trading. MGIC rose 84 cents, or 8.3 percent, to $10.97. Radian advanced $1.03, or 7.1 percent, to $15.64.
More Foreclosures
The U.S. Treasury Department reported on March 12 that lenders in the Home Affordable Modification Program led by Bank of America Corp. and JPMorgan Chase & Co. successfully converted 168,708 trial plans into permanent loan revisions through February, up from 116,297 a month earlier. More than 835,000 additional borrowers were in trial repayment plans, Treasury said.
“The government modification programs are starting to have an impact,” said Howlett of Macquarie. Howlett said the improvement in the so-called cure rate may allow insurers to reduce reserves and he expects Milwaukee-based MGIC to report its first quarterly profit in more than two years in the first three months of the 2010.
Mortgage insurers, which pay lenders when foreclosure fails to recoup costs, have suffered from a surge in claims as borrowers struggle to meet payments or refinance debts. About 2.82 million U.S. homeowners lost their properties to foreclosure last year and 4.5 million filings are expected in 2010, RealtyTrac Inc. said in January.
--With reporting by Dawn Kopecki in New York. Editors: Erik Holm, William Ahearn
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