Fitch Downgrades Two Mortgage Insurers

In separate announcements, Fitch Ratings, New York, has downgraded Republic Mortgage Insurance Co., Winston-Salem, N.C., and CMG Mortgage Insurance Co., a joint venture between PMI Mortgage Insurance Co., Winston-Salem, N.C., and CUNA Mutual Insurance Society, Madison, Wis. Both were cited for increasing numbers of delinquent loans in their respective insured portfolios. However, CMG was hit much harder, as its A+ insurer financial strength rating was slashed to BBB. In its report, Fitch said CMG is not likely to get additional capital from either PMI or CUNA Mutual. The company's ownership agreement provides for a capital call to its parent companies if its risk-to-capital ratio reaches 19-to-1. At the end of the third quarter, it was 16.8-to-1. "Furthermore, Fitch notes that CMG is operationally dependent on PMI and this raises uncertainty regarding CMG's operational stability and infrastructure in a scenario where PMI is placed into runoff," the report said. RMIC's IFS rating was only cut a single notch from BBB to BBB-. Even though RMIC's default rate has gone from 10.34% at the end of last year to 15.04% for the most recent quarter, it is still better than its peers. But Fitch is worried about RMIC's "high exposure to 2007 vintage loans."