Old Republic International Corp., Chicago, warned Thursday that without an agreement from its regulator and the secondary market, that it could stop writing new mortgage insurance business at the end of August, and put the unit into run-off.
Its MI affiliate, Republic Mortgage Insurance Co., has been operating under a waiver of having to meet the risk-to-capital ratio requirement in certain states. That waiver is scheduled to expire on Aug. 31.
Old Republic is in negotiations with RMIC's primary regulator as well as Fannie Mae and Freddie Mac regarding moving production of new mortgage insurance policies to a separately capitalized subsidiary.
As of Thursday, none of those three parties had agreed to such a move.
Therefore, Old Republic said, "it is probable that new business production, will cease, at least temporarily, prior to Aug. 31."
If it does not get approval to move business to the separately capitalized unit, RMIC "most likely" would have its book of business placed into run-off. In a run-off state, Old Republic would manage RMIC within its current capital base of $445 million.
Thursday morning Old Republic reported a $66 million loss for the second quarter, driven by a $176 million pretax operating loss at its mortgage insurance subsidiary.
For the same period last year, the parent company earned $57 million, while its MI unit had pretax operating losses of $22 million.
The company is blaming its problems on increased claims costs, which rose 85% in 2Q to $284 million.
While the number of new defaults is down, higher claims payments, fewer rescissions/denials, and higher claim severity led to the increase in costs.
Its title insurance unit had pretax operating profits of $5.5 million, with the company moving into the No. 3 position among the national title players.
