Five Key Quotes from PMI about Mortgages and Subprime

From PMI Group’s Q3’08: (PMI)

Promisingly, fewer claims were paid in Q3 while foreclosures in hard-hit areas appear to be slowing. Yet modified loans seem a drop in the bucket:

With the paid claim results we've experienced for the first nine months of the year, we're revising our expectation for our full year paid claims downward to $850 to $900 million from our previously announced range of $900 to $975 million.

We had about 10,000 loans that were worked on that allowed homeowners to stay in their homes for the first three quarters of the year and we estimate about 16,000 for 2008.

Overall we're seeing a slowing in our NOD [notice of default] development. We saw that in the third quarter in a couple of key states, Florida and California being two primary examples. So I think that's why we're seeing lower claims paid. 

How lender loan modifications will affect them: 

Q: have you done anything with the Bank of America/Countrywide (BAC)... modifying, potentially up to 400,000 loans? How many of those are sitting in your portfolio. Or even the latest announcement from JPMorgan (JPM)? [on loan modification]

A: Various forms of subprime, hybrid ARMs, payment option ARMs, and subprime loans – [are] about 4% to 5% of our current delinquencies.

The JPMorgan announcement is probably related to their acquisition of Wamu and the payment option-ARM exposure at Wamu… We have a very small exposure to payment option ARMs generally. I don't know to what degree we'll see our mapping of our default inventory over to Chase. My guess is it will be less than what we'll see with Countrywide. 

Let’s not forget: 

Fannie Mae (FNM) and Freddie Mac (FRE) have publicly said that we remain within good standing with them and are eligible to ensure product on their behalf… We're the largest counterparty to the GSEs. In order to provide the liquidity that's necessary for the market in '08 and '09, we will play a key role in that regard. 

Bracing for more writedowns from European investors in subprime? 

Q: [Why] the increase in the loss reserves in PMI Europe?

A: This is a continuation of certain reinsurance transactions that we have. It's U.S. subprime exposure and that is the continuation of the reserve build in Europe. Those transactions are approaching - at least the ones we've been provisioning for - their limits. 

More unemployment = more companies failing = more payout on bad bonds? 

We're looking for in 2009 somewhere in the 7.5% range, possibly up to 8%. But the core forecast is around 7.5%. Obviously unemployment negatively affects results.

 

Comments

[robert.b.fe...:]

I guess their crystal ball was broken.

2008 Nov 06 10:47 AM

[poncawolf:]

This Guy Is A Idiot - Mike Terrill of the Missile Defense Advocacy Alliance,

I went out and got a bunch of rat traps – but damn – there were no rats – so darn – let me make sure there some around.

These neo-cons are really some IDIOTS – and the sticker on there policy is – there damn rat traps don’t even work most of the time.

Didn’t we vote to get rid of this kind of idiotic-policy?

WE might need to round them up - and put them back into there dug out - and give them a vidio game - and burry there idiocacy forever

2008 Nov 06 08:33 PM