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MGIC Investment Corp. Message Board

  • paidbasher38291 paidbasher38291 Nov 14, 2012 1:51 PM Flag

    $1b short

    as it stands today, i estimate mtg is about $1b short of being able to pay all their claims, meaning they need to write niw at today's levels for at least 2-3 more years just to have enough money to break even, which is going to be increasingly difficult given their capital position is going to continue to shrink and lenders are going to be increasingly wary of dealing with them, i know, they have some consultant who says they can pay all claims even in a stress scenario, but can we see that analysis please, if only so i can get a laugh, how does that consultant estimate the loss performance of underwater borrowers who have never put anything down in a 35% house price decline scenario, i would like to know, because there is no historical precedent, no precedent, that is, except the recent performance of mtg's own books of business, and that precedent is not good, so far, half the 2007 flow business has gone away, and mtg has paid 2.6B of claims on that half, but that half includes over 10% of the 2007 book year that had prepaid before the crisis really hit in 2008, and includes untold ($1B+?) amounts of rescissions, which won't be available at those levels going forward, put it all together, along with 8% unemployment, and we are looking at a company who does not have sufficient claims paying resources today, despite the rosy scenarios they have paid to obtain, this is why freddie is willing to let them off the hook at 50 cents on the dollar, because freddie knows that if they force mtg into runoff, that is all they would get anyway, but as i said, the final blow will be when the lenders cut them off, like they did pmi and rmic, those two failed because they were no longer writing enough business that is made sense to allow them to continue to live, that will be mtg's fate.

    Sentiment: Strong Sell

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    • You made some good points. I too would love to see the analysis where they claim they can pay all claims in a stress scenario. To make that claim just strains all credibility they have. Any analysis that makes that claim is simply garbage.

      Though equally troubling as the 2007 book is the poor performance of the pre-2007 books (and in fact is instructive of how the 2007 book will perform). Everyone knows that 2006 would be bad, but look at the delinquency rates: 2007 - 20.07%, 2006 - 18.76%, 2005-16.38%, 2004 -15.26%, 2003 and prior - 15.56%. I find it incredible that those books have that high a dq rate this late in their life. and if you look at the trend, they have increased in recent quarters. Granted the dq counts have come down, so it is partly a function of a smaller denominator, but the trend to me suggests what you are kind of saying - those with positive equity who could have refied, did, those with no equity, didn't.

      The HARP refis may help a bit, but not much - when you hit financial stress, you often can make the payment or you can't. A 20% lower payment helps some, but certainly not all. There is no substitute for equity.

      The 2003 and prior books are saying to me that the 2006 - 2008 books are going to have a very, very long tail of losses. I would love to see how their consultant dealt with that reality. My guess is they didn't, and simply applied a standard loss curve to what has already happened.

      Realistically, you are right, they need several more years of high quality, high volume writings to outrun their legacy losses.

      Sentiment: Strong Sell

    • Good writing analysis Paid but it does not apply to MTG, it is in your wild imagination to create scenario of what will happen to your investment and more like apply to GNW that will not last the end of 2013. Paid sell your position in GNW and move it to MTG it is more likely to survive. Good luck.

      Sentiment: Strong Buy

    • Paid,

      Do you have a job?

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