Radian Group CEO Calls For Unity To Stabilize Housing Market
23 Octobre 2011 - 11:58PM
Dow Jones News
The chief executive officer of Radian Group Inc. (RDN) warned
that lenders and insurers need to work closely with the U.S.
government to prevent further "shocks" to the housing market in the
wake of the takeover of a rival mortgage insurer by Arizona
regulators last week.
"The housing industry is in a very fragile situation," said
Radian CEO S.A. Ibrahim in an interview Sunday. "We all need to
work very collaboratively to do everything we can to make sure the
housing industry doesn't suffer any more shocks," he said. The
warning comes as regulators and legislators are working to overhaul
the mortgage market on several fronts, with the aims of reducing
the government's role and avoiding a repetition of the conditions
that resulted in record foreclosures when the most-recent housing
bubble burst.
The Arizona Department of Insurance last week seized control of
PMI Group Inc. (PMI), ordering the mortgage insurer to pay just 50%
on any future claims, with the remainder to be deferred.
Mortgage insurers pay lenders on a portion of their losses if
homeowners default on their loans. The regulator's order means
mortgage investors such as Fannie Mae, Freddie Mac and Wells Fargo
& Co. (WFC) will likely be footing more of the bill than they
expected on defaulted loans insured by PMI.
"I hope PMI's announcement doesn't cause further psychological
harm to the homeowners market," Ibrahim said. But Ibrahim said the
remaining mortgage insurers are healthier than PMI, and should be
allowed to continue selling new coverage. Mortgage insurers
tightened their underwriting standards after the housing bubble
burst and insist the coverage they are selling now will be highly
profitable.
"There's a huge advantage to all of us to being allowed to
continue to write new business," Ibrahim said. "As long as the
remaining players continue to write business, the industry model
will be scarred but whole. Should any more players be forced to
stop writing business, it starts to cost the taxpayers even more
money" because a shuttered company wouldn't be able to use profits
on more-recent policies to pay off claims on the older ones.
Even PMI could have benefited from being allowed to sell
coverage, he said. The regulators in Arizona forced the company to
stop insuring new mortgages in August in advance of last week's
takeover. Because new business is profitable, Ibrahim said, "to
some extent, it may have been better if [Fannie and Freddie] and
others could have worked to allow PMI more flexibility. It may have
been better for the policyholders than getting paid 50%."
Ibrahim said that, unlike PMI, Radian's available capital is
well above the triggers that would require waivers from Fannie,
Freddie and state insurance regulators to keep selling new
business. In addition, the company has said it will have $630
million available at its holding company at the end of the year
that it could distribute to its mortgage-insurance subsidiary if
needed to further boost capital levels.
-By Erik Holm, Dow Jones Newswires; erik.holm@dowjones.com
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