Mortgage Insurer Triad: Lenders To Get Partial Claim Payments
April 03 2009 - 9:22AM
Dow Jones News
Troubled mortgage insurer Triad Guaranty Inc. (TGIC) is
notifying its lender customers that by regulator order, they will
get only partial payments of their claims beginning as soon as June
1.
"We are making a concerted effort to reach out to our major
policyholders to make sure they understand the order," said Ken
Jones, Triad's chief executive, in an emailed message.
Under an order issued by Illinois' top insurance regulator
Wednesday, Triad will begin paying only 60% of mortgage insurance
claims in cash on June 1 or a later date as determined by the
regulator, with 40% of the claim going to a deferred-payment
obligation, or DPO.
Government-sponsored mortgage holders Fannie Mae (FNM) and
Freddie Mac (FRE) represent over half of Triad's $17 billion of
risk in force. Bank of America Corp. (BAC) and Wells Fargo &
Co. (WFC) are Triad's largest private-lender customers.
Jones said the company does not disclose detail on its risk in
force by customer.
As to whether lenders will need to write down the value of their
mortgage insurance in their own books, "that will be the individual
lender decision and I am not aware of their plans," Jones said via
email.
When a borrower defaults on a mortgage, the lender initiates a
claim on its mortgage insurance policy, which generally covers up
to 20% of the loan due.
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.
Triad's subsidiary, Triad Guaranty Insurance Corp., stopped
writing mortgage insurance policies July 15 and the company has
been in runoff since then.
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. He declined to
name the insurer. In its annual report, Triad said an arbitration
decision is expected in the second quarter.
Triad's shares recently traded up 16% to 29 cents.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141;
lavonne.kuykendall@dowjones.com
(Kathy Shwiff contributed to this report.)