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Old Republic International Corporation Message Board

  • hike_mike hike_mike Apr 29, 2007 12:34 PM Flag

    Question:-Mortgage business

    As a non-insurance guru, reading the 2006AR, could I have a comment upon my interpretation of the Mortgage business ?

    Mortgage insurance is generally for those mortagages for < 20% equity. Is it true then that when housing prices fall by more than 10% THAT is when the insurance business will be in a pricing spiral and why attention is paid for declines in house prices ? Is the mostly an accellerator of housing price decline rather than a primary risk factor to the insurers. (ie, the housing prices decline <10% and there is not much risk to the insurers as there is on average equity, but beyond that the bottom line is hurt (excluding frictional costs, which are probably about 5%)
    Hence delinquenty is not much of a problem for the insurers until that 10% threshold is reached (one could say 5%), because the principle can be recovered by foreclosure, but beyond that, it is real, and increasing.

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