More on the Mortgage Insurance Issue
by Tom on December 28, 2009
in Market Musings
On Saturday, I told you about an article where S & P has downgraded the credit ratings of some of the main PMI companies. Now we’ve got a story about how Bank of America is suing MGIC saying that MGIC denied millions of valid claims on defaulted loans.
A couple of thoughts on this:
- I don’t think it was a misprint that Housing Wire said millions of claims rather than millions of dollars worth of claims. MGIC is one of the major PMI companies and Countrywide was one of the bigger 0% down lenders. Not a healthy mix.
- I would dare venture that a large portion of the reason for MGIC denying the claims has to do with, how shall we say it, the “caliber” of the documentation that’s in the files. Claims of fraud, misrepresentation, undue influence, all kinds of fun things are probably part of the reasons for the denial of the claims.
But the thing that I find most interesting about this article is MGIC’s response to it. The typical response is something along the lines of “We find these claims to be totally without merit and look forward to our chance to show that we are innocent of all charges.”
But what did they say? “We’re going to defend ourselves but we dont’ know if we’ll win and we don’t know what it’s going to do to us.”
When you take that and combine it with the fact that MGIC is already experiencing severe financial difficulties and it doesn’t bode well for mortgages with less than 20% down that aren’t FHA loans…….
Tom Vanderwell
BofA Sues MGIC Over Unpaid Insurance Claims : HousingWire || financial news for the mortgage market
Bank of America’s (BAC: 15.25 +0.39%) Countrywide Home Loans unit sued Mortgage Guaranty Investment Corp. (MTG: 5.99 +3.99%) over allegations the Wisconsin-based mortgage insurer denied millions of valid claims.The suit was disclosed in a Securities and Exchange Commission (SEC) filing. Countrywide and BAC Home Loans Servicing filed the suit against primary MGIC subsidiary Mortgage Guaranty Insurance Corp. (MGIC) in Superior Court of the State of California in San Francisco on December 17.
The case seeks declaratory relief against MGIC for what it says are valid claims against mortgages that defaulted. The case also seeks a ruling on the “proper interpretation of the flow insurance policies at issue.”
In the filing, MGIC said it intends to defend itself but is “unable to predict the outcome of this case or its effect on us.”
Technorati Tags: PMI, MGIC, Countrywide, Bank of America
