Insurance regulators in Illinois have issued an order placing Triad Guaranty Insurance Corp., Winston-Salem, N.C., into rehabilitation, seizing control of the company from its parent Triad Guaranty Inc. The imminent likelihood of this happening was disclosed in the parent company’s third-quarter 10-Q.
Triad was the first of the private mortgage insurers to go into run-off as a result of the mortgage crisis. The two other companies in run-off, PMI and Republic Mortgage Insurance Co., both remain under control of their publicly traded parent companies.
On Aug. 31, Triad told the Illinois Department of Insurance it was in violation of the second corrective order the regulator issued in regard to its deferred payment obligation. At Sept. 30, the recorded DPO, including accrued interest of $45.7 million, amounted to $765 million, which exceeded Triad’s cash and invested assets.
Being placed into rehabilitation means Illinois Department of Insurance director Andrew Boron will now be in charge of TGIC’s (and another subsidiary’s) property, assets, rights of action or lawsuits, books records and premises.
Boron is also charged with developing a plan to pay TGIC creditors including Fannie Mae, Freddie Mac and mortgage lenders. The plan is expected to be filed in 45 days.
Triad said in a press release that it has consented to the receivership order. In a related matter, Illinois regulators approved reimbursement of $734,000 incurred by Triad Guaranty on behalf of TGIC. But because of order of rehabilitation, Triad Guaranty will not receive any further funds from TGIC.
As a result, Triad Guaranty is expected to file for Chapter 11 bankruptcy.