Mortgage Insurers Remain under Capital Pressure

The entire mortgage insurance industry will remain capital constrained, especially in the absence of "significant government actions" such as the Troubled Asset Relief Program, declared Friedman Billings Ramsey analyst Steve Stelmach. The comment appeared in a report on The PMI Group Inc., Walnut Creek, Calif. "We continue to expect the difficult credit environment (particularly in the seasonally weak fourth quarter) to weigh on results, despite heightened efforts on the parts of mortgage lenders and servicers to more proactively mitigate losses. In addition, at 15.8-to-1 risk-to-capital, leverage is stretched during a time when the entire industry's ability to gain access to capital or reinsurance is limited," he wrote. Capital levels continue to erode at PMI because of the sale of its Australian and Asian units. Management expected this to occur, but Mr. Stelmach said, "The lower capital level is discouraging nonetheless."