If you read Barron’s each weekend, you might think that mortgage insurers are about to die off. Actually, it would be those which are left standing to die off. Mortgage insurance is that pesky part of the mortgage process that drives costs higher while supposedly shielding lenders from losses. It did not work out too well after the recession and Barron’s shows more pain on the way.
Both MGIC Investment Corporation (NYSE: MTG) is down over 7% at $4.02 on the day and Radian Group Inc. (NYSE: RDN) is down 2% at $2.93 on the day. With such low share prices, you know things have just gone every way but back up.
It will be interesting to see how the mortgage industry goes if there are no pure-play mortgage insurance outfits still afloat. Lenders try to use the mortgage insurance as a shield and borrowers will resort to all sorts of mortgage tricks in order to escape paying mortgage insurance.
Historically, mortgage insurance is thought of a bit like a chronic disease… very difficult to get rid of regardless of your efforts and abilities.
If PMI Group Inc. is any barometer as far as pain and migration from NYSE to OTC for common equity holders, then more losses are headed this way for a down and out sector.
JON C. OGG
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