Mortgage Insurer Triad's Payment Woes Fall To Fannie, Freddie
03 April 2009 - 1:55AM
Dow Jones News
More than half of troubled mortgage insurer Triad Guaranty
Inc.'s (TGIC) $17 billion of risk in force is written on mortgages
owned by Fannie Mae (FNM) and Freddie Mac (FRE), while Bank of
America (BAC) and Wells Fargo (WFC) are Triad's largest private
lender customers, Triad's chief executive said Thursday.
Under an order issued by Illinois' top insurance regulator
Wednesday, Triad said it will begin paying only 60% of
mortgage-insurance claims in cash on June 1 at the earliest, with
40% of the claim going to a deferred payment obligation, or DPO.
The regulator has the option to move it to a later date, Triad
said.
Ken Jones, Triad's president and chief executive, said in a
press release Wednesday that continuing volatility in the housing
market along with fraud and worsening overall economic conditions
"make it very difficult to forecast Triad's future financial
position and claims."
The regulator's order establishes an equitable process for
paying claims and "helps us preserve resources available to pay
claims," he added.
In an interview with Dow Jones Newswires, Jones said that loan
modification programs currently being debated "have the potential
to be beneficial to us if they are successful."
While Triad has more than $2 billion in claims-paying resources,
uncertainty about the economy and the decline in Triad's capital
mean it may not be able to meet all future obligations under its
policies, Triad said.
The DPO will be represented by a separate entry in Triad's
financial statements and will accrue a carrying charge based on the
investment yield earned by Triad's investment portfolio.
Payments of the carrying charge and DPO will be subject to
Triad's future financial performance and will require approval of
the Illinois official.
"While Triad continues to believe that it has sufficient
resources to pay all current and future valid claims, there is more
uncertainty today than when we entered run-off in July 2008," Jones
said in the press release.
Triad's subsidiary, Triad Guaranty Insurance Corp., stopped
writing mortgage-insurance policies July 15 and the company has
been in run-off since then.
Last month, Triad said its auditors, in the mortgage insurer's
financial statements for 2008, expressed doubt about its ability to
continue as a going concern.
Jones also said that the company's ongoing dispute with an
insurance carrier over an approximately $90 million excess and
surplus loss coverage is currently in arbitration.
Mortgage insurers have been under pressure as expectations for
losses on home loans climb. Delinquencies and defaults have soared,
reflecting a collapse in underwriting standards in the last years
of the housing boom.
Triad's shares recently traded at $0.01, or 5.4%, higher at
$0.20 each. The stock price has fallen 93% over the past 12
months.
-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141;
lavonne.kuykendall@dowjones.com
(Kathy Shwiff contributed to this report.)