Fitch mulls mortgage insurance downgrade

Feb. 25, 2008 (Thomson Financial delivered by Newstex) — NEW YORK (AP) - Fitch Ratings is considering slashing its rating on some of the biggest mortgage insurers in the country, saying Monday a spike in unpaid home loans is triggering more claims. Fitch is considering downgrading PMI Group Inc. (NYSE:PMI PRA) (NYSE:PMI) , MGIC Investment Corp. (NYSE:MTG) and Radian Group Inc. (NYSE:RDN) , the ratings agency said.

These companies write insurance policies that promise to repay lenders when their borrower fail to repay loans. With home prices down 10 percent in the past year, many homeowners who used to borrow against the value of their homes have now lost this ability, Fitch said. Further, many borrowers have lost the incentive to repay mortgages because their homes are ‘underwater,’ meaning worth less than the cost of their mortgage.

‘This phenomenon has created an incentive to ‘walk away’ from mortgage debt,’ Fitch said. MGIC, PMI and Radian guarantee the payments on $120 billion in home loans. Fitch is still considering downgrading Triad Guaranty Inc. (NASDAQ:TGIC) , which insures $11.9 billion in debt. Fitch is not considering downgrading the mortgage insurance segments of American International Group Inc. (NYSE:AIG) or Genworth Financial Inc. (NYSE:GNW PRE) (NYSE:GNW) , which combined insure $57 billion in home loans.

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