SAN FRANCISCO – Officials with CMG Mortgage Insurance Co., a joint venture with CUNA Mutual Group, said the growing financial woes at CUNA mutual’s partner PMI Group will not affect its on operations selling private mortgage insurance for credit unions.
“PMI’s current status does not affect the joint venture,” a spokesperson for CMG Mortgage Insurance Company said yesterday, after the joint venture partner announced it could be forced to stop selling new coverage amid more than $3 billion of losses since 2007. The news sent PMI shares plunging more than 50% on Thursday to close at just 41 cents.
The CMG spokesman said the joint venture, which is 50% owned by CUNA Mutual and 50% by PMI, is well-capitalized. As of June 30, CMG MI had the industry’s strongest risk-to-capital ratio of 19.7 to 1, she said.
The reassurance on the credit union business came after PMI reported its primary subsidiary had missed key capital-adequacy targets in the second quarter and is likely to be shut down by its primary regulator in Arizona if it is unable to “obtain significant capital.”
Mortgage insurers have suffered from billions of dollars in losses on policies they sold in the years just before the housing bubble burst.
PMI said it had a net loss of $134 million in the second quarter as lenders pushed back against its efforts to deny some claims. It ended the quarter with a policyholders’ position about $320 million below the minimum required by Arizona law.
“I do not know if we will be able to complete a capital transaction that will successfully allow us to continue to write new insurance business,” said L. Stephen Smith, CEO of PMI, during a conference call with investors yesterday. “I do believe, however, that there is recognition from a variety of parties that a creative solution to PMI’s current challenges would be beneficial to PMI, its investors, policyholders, potential future investors and the housing market.”
