x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
WISCONSIN
|
39-1486475
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
250 E. KILBOURN AVENUE
|
53202
|
|
MILWAUKEE, WISCONSIN
|
(Zip Code)
|
|
(Address of principal executive offices)
|
YES x
|
|
NO o
|
YES x
|
|
NO o
|
Large accelerated filer x
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company o
|
(Do not check if a smaller reporting company)
|
YES o
|
|
NO x
|
CLASS OF STOCK
|
PAR VALUE
|
DATE
|
NUMBER OF SHARES
|
Common stock
|
$1.00
|
10/31/13
|
337,758,169
|
|
September 30,
|
December 31,
|
||||||
|
2013
|
2012
|
||||||
ASSETS
|
(In thousands)
|
|||||||
Investment portfolio (notes 7 and 8):
|
||||||||
Securities, available-for-sale, at fair value:
|
||||||||
Fixed maturities (amortized cost, 2013 - $5,078,232; 2012 - $4,185,937)
|
$
|
5,017,288
|
$
|
4,227,339
|
||||
Equity securities
|
2,884
|
2,936
|
||||||
Total investment portfolio
|
5,020,172
|
4,230,275
|
||||||
Cash and cash equivalents
|
458,070
|
1,027,625
|
||||||
Restricted cash and cash equivalents (note 1)
|
60,348
|
-
|
||||||
Accrued investment income
|
34,250
|
27,243
|
||||||
Reinsurance recoverable on loss reserves (note 4)
|
70,621
|
104,848
|
||||||
Reinsurance recoverable on paid losses
|
14,377
|
15,605
|
||||||
Premium receivable
|
65,262
|
67,828
|
||||||
Home office and equipment, net
|
26,411
|
27,190
|
||||||
Deferred insurance policy acquisition costs
|
12,518
|
11,245
|
||||||
Other assets
|
95,509
|
62,465
|
||||||
Total assets
|
$
|
5,857,538
|
$
|
5,574,324
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Liabilities:
|
||||||||
Loss reserves (note 12)
|
$
|
3,352,994
|
$
|
4,056,843
|
||||
Premium deficiency reserve (note 13)
|
57,035
|
73,781
|
||||||
Unearned premiums
|
149,369
|
138,840
|
||||||
Senior notes (note 3)
|
82,758
|
99,910
|
||||||
Convertible senior notes (note 3)
|
845,000
|
345,000
|
||||||
Convertible junior debentures (note 3)
|
389,522
|
379,609
|
||||||
Other liabilities
|
277,814
|
283,401
|
||||||
Total liabilities
|
5,154,492
|
5,377,384
|
||||||
|
||||||||
Contingencies (note 5)
|
||||||||
|
||||||||
Shareholders' equity (note 14):
|
||||||||
Common stock (one dollar par value, shares authorized 1,000,000; shares issued 2013 - 340,047; 2012 - 205,047; shares outstanding 2013 - 337,758; 2012 - 202,032)
|
340,047
|
205,047
|
||||||
Paid-in capital
|
1,659,914
|
1,135,296
|
||||||
Treasury stock (shares at cost 2013 - 2,289; 2012 - 3,015)
|
(64,435
|
)
|
(104,959
|
)
|
||||
Accumulated other comprehensive loss, net of tax (note 9)
|
(159,270
|
)
|
(48,163
|
)
|
||||
Accumulated deficit
|
(1,073,210
|
)
|
(990,281
|
)
|
||||
Total shareholders' equity
|
703,046
|
196,940
|
||||||
Total liabilities and shareholders' equity
|
$
|
5,857,538
|
$
|
5,574,324
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Revenues:
|
(In thousands, except per share data)
|
|||||||||||||||
Premiums written:
|
||||||||||||||||
Direct
|
$
|
247,254
|
$
|
271,360
|
$
|
749,282
|
$
|
782,094
|
||||||||
Assumed
|
509
|
597
|
1,591
|
1,852
|
||||||||||||
Ceded
|
(13,485
|
)
|
(8,452
|
)
|
(31,473
|
)
|
(26,850
|
)
|
||||||||
Net premiums written
|
234,278
|
263,505
|
719,400
|
757,096
|
||||||||||||
(Increase) decrease in unearned premiums, net
|
(2,421
|
)
|
2,927
|
(2,707
|
)
|
14,369
|
||||||||||
Net premiums earned
|
231,857
|
266,432
|
716,693
|
771,465
|
||||||||||||
Investment income, net of expenses
|
20,250
|
30,394
|
59,461
|
99,980
|
||||||||||||
Realized investment gains, net
|
189
|
6,184
|
3,933
|
110,356
|
||||||||||||
Total other-than-temporary impairment losses
|
(328
|
)
|
-
|
(328
|
)
|
(339
|
)
|
|||||||||
Portion of losses recognized in other comprehensive income, before taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Net impairment losses recognized in earnings
|
(328
|
)
|
-
|
(328
|
)
|
(339
|
)
|
|||||||||
Other revenue
|
2,481
|
3,209
|
7,735
|
25,530
|
||||||||||||
Total revenues
|
254,449
|
306,219
|
787,494
|
1,006,992
|
||||||||||||
|
||||||||||||||||
Losses and expenses:
|
||||||||||||||||
Losses incurred, net (note 12)
|
180,189
|
490,121
|
642,671
|
1,378,617
|
||||||||||||
Change in premium deficiency reserve (note 13)
|
(3,813
|
)
|
(9,144
|
)
|
(16,746
|
)
|
(50,685
|
)
|
||||||||
Amortization of deferred policy acquisition costs
|
2,209
|
1,939
|
5,861
|
5,544
|
||||||||||||
Other underwriting and operating expenses, net
|
45,761
|
48,739
|
139,683
|
144,387
|
||||||||||||
Interest expense
|
17,653
|
24,478
|
62,001
|
74,017
|
||||||||||||
Total losses and expenses
|
241,999
|
556,133
|
833,470
|
1,551,880
|
||||||||||||
Income (loss) before tax
|
12,450
|
(249,914
|
)
|
(45,976
|
)
|
(544,888
|
)
|
|||||||||
Provision for (benefit from) income taxes (note 11)
|
336
|
(2,972
|
)
|
2,465
|
(4,500
|
)
|
||||||||||
|
||||||||||||||||
Net income (loss)
|
$
|
12,114
|
$
|
(246,942
|
)
|
$
|
(48,441
|
)
|
$
|
(540,388
|
)
|
|||||
|
||||||||||||||||
Income (loss) per share (note 6):
|
||||||||||||||||
Basic
|
$
|
0.04
|
$
|
(1.22
|
)
|
$
|
(0.16
|
)
|
$
|
(2.68
|
)
|
|||||
Diluted
|
$
|
0.04
|
$
|
(1.22
|
)
|
$
|
(0.16
|
)
|
$
|
(2.68
|
)
|
|||||
Weighted average common shares outstanding - diluted (note 6)
|
339,426 | 202,014 | 302,996 | 201,851 |
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Net income (loss)
|
$
|
12,114
|
$
|
(246,942
|
)
|
$
|
(48,441
|
)
|
$
|
(540,388
|
)
|
|||||
|
||||||||||||||||
Other comprehensive income (loss), net of tax (note 9):
|
||||||||||||||||
|
||||||||||||||||
Change in unrealized investment gains and losses
|
7,277
|
44,487
|
(100,796
|
)
|
6,781
|
|||||||||||
|
||||||||||||||||
Foreign currency translation adjustment
|
1,885
|
1,109
|
(10,311
|
)
|
1,468
|
|||||||||||
|
||||||||||||||||
Other comprehensive income (loss), net of tax
|
9,162
|
45,596
|
(111,107
|
)
|
8,249
|
|||||||||||
|
||||||||||||||||
Comprehensive income (loss)
|
$
|
21,276
|
$
|
(201,346
|
)
|
$
|
(159,548
|
)
|
$
|
(532,139
|
)
|
|
Accumulated
|
|||||||||||||||||||
|
other
|
|||||||||||||||||||
Common
|
Paid-in
|
Treasury
|
comprehensive
|
Accumulated
|
||||||||||||||||
|
stock
|
capital
|
stock
|
income (loss)
|
deficit
|
|||||||||||||||
|
(In thousands)
|
|||||||||||||||||||
|
||||||||||||||||||||
Balance, December 31, 2011
|
$
|
205,047
|
$
|
1,135,821
|
$
|
(162,542
|
)
|
$
|
30,124
|
$
|
(11,635
|
)
|
||||||||
|
||||||||||||||||||||
Net loss
|
(927,079
|
)
|
||||||||||||||||||
Change in unrealized investment gains and losses, net
|
-
|
-
|
-
|
(78,659
|
)
|
-
|
||||||||||||||
Reissuance of treasury stock, net
|
-
|
(8,749
|
)
|
57,583
|
-
|
(51,567
|
)
|
|||||||||||||
Equity compensation
|
-
|
8,224
|
-
|
-
|
-
|
|||||||||||||||
Defined benefit plan adjustments, net
|
-
|
-
|
-
|
(1,221
|
)
|
-
|
||||||||||||||
Unrealized foreign currency translation adjustment
|
-
|
-
|
-
|
1,593
|
-
|
|||||||||||||||
|
||||||||||||||||||||
Balance, December 31, 2012
|
$
|
205,047
|
$
|
1,135,296
|
$
|
(104,959
|
)
|
$
|
(48,163
|
)
|
$
|
(990,281
|
)
|
|||||||
|
||||||||||||||||||||
Net loss
|
(48,441
|
)
|
||||||||||||||||||
Change in unrealized investment gains and losses, net (notes 7 and 8)
|
-
|
-
|
-
|
(100,796
|
)
|
-
|
||||||||||||||
Common stock issuance (note 14)
|
135,000
|
528,335
|
-
|
-
|
-
|
|||||||||||||||
Reissuance of treasury stock, net
|
-
|
(7,892
|
)
|
40,524
|
-
|
(34,488
|
)
|
|||||||||||||
Equity compensation
|
-
|
4,175
|
-
|
-
|
-
|
|||||||||||||||
Unrealized foreign currency translation adjustment
|
-
|
-
|
-
|
(10,311
|
)
|
-
|
||||||||||||||
|
||||||||||||||||||||
Balance, September 30, 2013
|
$
|
340,047
|
$
|
1,659,914
|
$
|
(64,435
|
)
|
$
|
(159,270
|
)
|
$
|
(1,073,210
|
)
|
|
Nine Months Ended
September 30,
|
|||||||
|
||||||||
|
2013
|
2012
|
||||||
|
(In thousands)
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(48,441
|
)
|
$
|
(540,388
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and other amortization
|
53,599
|
77,226
|
||||||
Deferred tax benefit
|
(11
|
)
|
(2,645
|
)
|
||||
Realized investment gains, excluding impairment losses
|
(3,933
|
)
|
(110,356
|
)
|
||||
Net investment impairment losses
|
328
|
339
|
||||||
Gain on repurchases of senior notes
|
-
|
(17,775
|
)
|
|||||
Other
|
(14,147
|
)
|
(14,449
|
)
|
||||
Change in certain assets and liabilities:
|
||||||||
Accrued investment income
|
(7,007
|
)
|
13,249
|
|||||
Reinsurance recoverable on loss reserves
|
34,227
|
36,748
|
||||||
Reinsurance recoverable on paid losses
|
1,228
|
3,165
|
||||||
Premium receivable
|
2,566
|
2,435
|
||||||
Deferred insurance policy acquisition costs
|
(1,273
|
)
|
(2,946
|
)
|
||||
Loss reserves
|
(703,849
|
)
|
(553,511
|
)
|
||||
Premium deficiency reserve
|
(16,746
|
)
|
(50,685
|
)
|
||||
Unearned premiums
|
10,529
|
(14,729
|
)
|
|||||
Income taxes payable (current)
|
314
|
1,800
|
||||||
Net cash used in operating activities
|
(692,616
|
)
|
(1,172,522
|
)
|
||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed maturities
|
(2,669,778
|
)
|
(3,330,811
|
)
|
||||
Purchase of equity securities
|
(69
|
)
|
(70
|
)
|
||||
Proceeds from sale of fixed maturities
|
602,062
|
3,165,897
|
||||||
Proceeds from maturity of fixed maturities
|
1,120,152
|
1,138,371
|
||||||
Net increase (decrease) in payable for securities
|
317
|
(13,153
|
)
|
|||||
Net change in restricted cash
|
(60,348
|
)
|
-
|
|||||
Net cash (used in) provided by investing activities
|
(1,007,664
|
)
|
960,234
|
|||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Net proceeds from convertible senior notes
|
484,625
|
-
|
||||||
Common stock shares issued
|
663,335
|
-
|
||||||
Repurchases of long-term debt
|
(17,235
|
)
|
(53,107
|
)
|
||||
Net cash provided by (used in) financing activities
|
1,130,725
|
(53,107
|
)
|
|||||
|
||||||||
Net decrease in cash and cash equivalents
|
(569,555
|
)
|
(265,395
|
)
|
||||
Cash and cash equivalents at beginning of period
|
1,027,625
|
995,799
|
||||||
Cash and cash equivalents at end of period
|
$
|
458,070
|
$
|
730,404
|
|
Par Value
|
Total Fair
Value
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||||
|
(In thousands)
|
|||||||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Senior Notes
|
$
|
82,883
|
$
|
85,369
|
$
|
85,369
|
$
|
-
|
$
|
-
|
||||||||||
Convertible Senior Notes due 2017
|
345,000
|
370,754
|
370,754
|
-
|
-
|
|||||||||||||||
Convertible Senior Notes due 2020
|
500,000
|
620,000
|
620,000
|
-
|
-
|
|||||||||||||||
Convertible Junior Subordinated Debentures
|
389,522
|
428,233
|
-
|
428,233
|
-
|
|||||||||||||||
Total Debt
|
$
|
1,317,405
|
$
|
1,504,356
|
$
|
1,076,123
|
$
|
428,233
|
$
|
-
|
||||||||||
|
||||||||||||||||||||
December 31, 2012
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Senior Notes
|
$
|
100,118
|
$
|
79,594
|
$
|
79,594
|
$
|
-
|
$
|
-
|
||||||||||
Convertible Senior Notes due 2017
|
345,000
|
242,880
|
242,880
|
-
|
-
|
|||||||||||||||
Convertible Junior Subordinated Debentures
|
389,522
|
173,096
|
-
|
173,096
|
-
|
|||||||||||||||
Total Debt
|
$
|
834,640
|
$
|
495,570
|
$
|
322,474
|
$
|
173,096
|
$
|
-
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
||||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands, except per share data)
|
|||||||||||||||
|
||||||||||||||||
Basic earnings per share:
|
||||||||||||||||
Weighted average common shares outstanding
|
337,868
|
202,014
|
302,996
|
201,851
|
||||||||||||
Net income (loss)
|
$
|
12,114
|
$
|
(246,942
|
)
|
$
|
(48,441
|
)
|
$
|
(540,388
|
)
|
|||||
Basic income (loss) per share
|
$
|
0.04
|
$
|
(1.22
|
)
|
$
|
(0.16
|
)
|
$
|
(2.68
|
)
|
|||||
|
||||||||||||||||
Diluted earnings per share:
|
||||||||||||||||
Weighted-average shares - Basic
|
337,868
|
202,014
|
302,996
|
201,851
|
||||||||||||
Common stock equivalents
|
1,558
|
-
|
-
|
-
|
||||||||||||
|
||||||||||||||||
Weighted-average shares - Diluted
|
339,426
|
202,014
|
302,996
|
201,851
|
||||||||||||
|
||||||||||||||||
Net income (loss)
|
$
|
12,114
|
$
|
(246,942
|
)
|
$
|
(48,441
|
)
|
$
|
(540,388
|
)
|
|||||
Diluted income (loss) per share
|
$
|
0.04
|
$
|
(1.22
|
)
|
$
|
(0.16
|
)
|
$
|
(2.68
|
)
|
Gross
|
Gross
|
|||||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||
September 30, 2013
|
Cost
|
Gains
|
Losses (1)
|
Value
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
803,637
|
$
|
1,853
|
$
|
(18,723
|
)
|
$
|
786,767
|
|||||||
Obligations of U.S. states and political subdivisions
|
920,006
|
7,294
|
(14,467
|
)
|
912,833
|
|||||||||||
Corporate debt securities
|
2,180,842
|
8,884
|
(25,268
|
)
|
2,164,458
|
|||||||||||
Asset-backed securities
|
340,273
|
1,049
|
(508
|
)
|
340,814
|
|||||||||||
Residential mortgage-backed securities
|
395,664
|
162
|
(18,261
|
)
|
377,565
|
|||||||||||
Commercial mortgage-backed securities
|
260,130
|
90
|
(6,413
|
)
|
253,807
|
|||||||||||
Collateralized loan obligations
|
61,336
|
-
|
(831
|
)
|
60,505
|
|||||||||||
Debt securities issued by foreign sovereign governments
|
116,344
|
5,162
|
(967
|
)
|
120,539
|
|||||||||||
Total debt securities
|
5,078,232
|
24,494
|
(85,438
|
)
|
5,017,288
|
|||||||||||
Equity securities
|
2,867
|
29
|
(12
|
)
|
2,884
|
|||||||||||
|
||||||||||||||||
Total investment portfolio
|
$
|
5,081,099
|
$
|
24,523
|
$
|
(85,450
|
)
|
$
|
5,020,172
|
|
Gross
|
Gross
|
||||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||
December 31, 2012
|
Cost
|
Gains
|
Losses (1)
|
Value
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
863,282
|
$
|
3,040
|
$
|
(71
|
)
|
$
|
866,251
|
|||||||
Obligations of U.S. states and political subdivisions
|
795,935
|
16,965
|
(506
|
)
|
812,394
|
|||||||||||
Corporate debt securities
|
1,469,844
|
13,813
|
(2,716
|
)
|
1,480,941
|
|||||||||||
Asset-backed securities
|
322,802
|
1,657
|
(23
|
)
|
324,436
|
|||||||||||
Residential mortgage-backed securities
|
451,352
|
871
|
(1,314
|
)
|
450,909
|
|||||||||||
Commercial mortgage-backed securities
|
150,232
|
524
|
(414
|
)
|
150,342
|
|||||||||||
Debt securities issued by foreign sovereign governments
|
132,490
|
9,784
|
(208
|
)
|
142,066
|
|||||||||||
Total debt securities
|
4,185,937
|
46,654
|
(5,252
|
)
|
4,227,339
|
|||||||||||
Equity securities
|
2,797
|
139
|
-
|
2,936
|
||||||||||||
|
||||||||||||||||
Total investment portfolio
|
$
|
4,188,734
|
$
|
46,793
|
$
|
(5,252
|
)
|
$
|
4,230,275
|
Amortized
|
Fair
|
|||||||
September 30, 2013
|
Cost
|
Value
|
||||||
|
(In thousands)
|
|||||||
|
||||||||
Due in one year or less
|
$
|
793,035
|
$
|
794,081
|
||||
Due after one year through five years
|
1,876,491
|
1,881,820
|
||||||
Due after five years through ten years
|
870,872
|
846,993
|
||||||
Due after ten years
|
480,431
|
461,703
|
||||||
|
||||||||
|
$
|
4,020,829
|
$
|
3,984,597
|
||||
|
||||||||
Asset-backed securities
|
340,273
|
340,814
|
||||||
Residential mortgage-backed securities
|
395,664
|
377,565
|
||||||
Commercial mortgage-backed securities
|
260,130
|
253,807
|
||||||
Collateralized loan obligations
|
61,336
|
60,505
|
||||||
|
||||||||
Total at September 30, 2013
|
$
|
5,078,232
|
$
|
5,017,288
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
||||||||||||||||||
September 30, 2013
|
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
||||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
466,889
|
$
|
18,723
|
$
|
-
|
$
|
-
|
$
|
466,889
|
$
|
18,723
|
||||||||||||
Obligations of U.S. states and political subdivisions
|
450,898
|
14,426
|
1,726
|
41
|
452,624
|
14,467
|
||||||||||||||||||
Corporate debt securities
|
1,265,779
|
24,940
|
14,089
|
328
|
1,279,868
|
25,268
|
||||||||||||||||||
Asset-backed securities
|
84,000
|
508
|
-
|
-
|
84,000
|
508
|
||||||||||||||||||
Residential mortgage-backed securities
|
348,693
|
17,796
|
24,744
|
465
|
373,437
|
18,261
|
||||||||||||||||||
Commercial mortgage-backed securities
|
221,265
|
6,413
|
177
|
-
|
221,442
|
6,413
|
||||||||||||||||||
Collateralized loan obligations
|
60,505
|
831
|
-
|
-
|
60,505
|
831
|
||||||||||||||||||
Debt securities issued by foreign sovereign governments
|
25,461
|
777
|
7,037
|
190
|
32,498
|
967
|
||||||||||||||||||
Equity securities
|
977
|
12
|
-
|
-
|
977
|
12
|
||||||||||||||||||
Total investment portfolio
|
$
|
2,924,467
|
$
|
84,426
|
$
|
47,773
|
$
|
1,024
|
$
|
2,972,240
|
$
|
85,450
|
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
|||||||||||||||||||||
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
||||||||||||||||||
December 31, 2012
|
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
||||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
24,094
|
$
|
71
|
$
|
-
|
$
|
-
|
$
|
24,094
|
$
|
71
|
||||||||||||
Obligations of U.S. states and political subdivisions
|
156,111
|
505
|
1,006
|
1
|
157,117
|
506
|
||||||||||||||||||
Corporate debt securities
|
280,765
|
2,714
|
3,353
|
2
|
284,118
|
2,716
|
||||||||||||||||||
Asset-backed securities
|
29,675
|
23
|
-
|
-
|
29,675
|
23
|
||||||||||||||||||
Residential mortgage-backed securities
|
315,000
|
982
|
19,939
|
332
|
334,939
|
1,314
|
||||||||||||||||||
Commercial mortgage-backed securities
|
72,689
|
414
|
-
|
-
|
72,689
|
414
|
||||||||||||||||||
Debt securities issued by foreign sovereign governments
|
14,695
|
208
|
-
|
-
|
14,695
|
208
|
||||||||||||||||||
Total investment portfolio
|
$
|
893,029
|
$
|
4,917
|
$
|
24,298
|
$
|
335
|
$
|
917,327
|
$
|
5,252
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
Net realized investment gains (losses) and OTTI on investments:
|
||||||||||||||||
Fixed maturities
|
$
|
(393
|
)
|
$
|
8,901
|
$
|
2,755
|
$
|
110,335
|
|||||||
Equity securities
|
254
|
30
|
850
|
424
|
||||||||||||
Other
|
-
|
(2,747
|
)
|
-
|
(742
|
)
|
||||||||||
|
||||||||||||||||
|
$
|
(139
|
)
|
$
|
6,184
|
$
|
3,605
|
$
|
110,017
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
Net realized investment gains (losses) and OTTI on investments:
|
||||||||||||||||
Gains on sales
|
$
|
391
|
$
|
10,559
|
$
|
5,352
|
$
|
118,599
|
||||||||
Losses on sales
|
(202
|
)
|
(4,375
|
)
|
(1,419
|
)
|
(8,243
|
)
|
||||||||
Impairment losses
|
(328
|
)
|
-
|
(328
|
)
|
(339
|
)
|
|||||||||
|
||||||||||||||||
|
$
|
(139
|
)
|
$
|
6,184
|
$
|
3,605
|
$
|
110,017
|
· | Securities available-for-sale classified in Level 3 are not readily marketable and are valued using internally developed models based on the present value of expected cash flows. Our Level 3 securities, at December 31, 2012, primarily consisted of auction rate securities for which observable inputs or value drivers were unavailable. Due to limited market information, we utilized a discounted cash flow (“DCF”) model to derive an estimate of fair value of these assets at December 31, 2012. The DCF model for estimating the fair value of the auction rate securities as of December 31, 2012 was based on the following key assumptions: |
o | Nominal credit risk as substantially all of the underlying collateral of these securities is ultimately guaranteed by the United States Department of Education; |
o | Time to liquidity through December 31, 2013; |
o | Continued receipt of contractual interest; and |
o | Discount rates ranging from 16.87% to 18.35%, which include a spread for liquidity risk. |
· | Real estate acquired through claim settlement is fair valued at the lower of our acquisition cost or a percentage of appraised value. The percentage applied to appraised value is based upon our historical sales experience adjusted for current trends. |
Fair Value
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||
September 30, 2013
|
||||||||||||||||
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
786,767
|
$
|
786,767
|
$
|
-
|
$
|
-
|
||||||||
Obligations of U.S. states and political subdivisions
|
912,833
|
-
|
910,263
|
2,570
|
||||||||||||
Corporate debt securities
|
2,164,458
|
-
|
2,164,458
|
-
|
||||||||||||
Asset-backed securities
|
340,814
|
-
|
340,814
|
-
|
||||||||||||
Residential mortgage-backed securities
|
377,565
|
-
|
377,565
|
-
|
||||||||||||
Commercial mortgage-backed securities
|
253,807
|
-
|
253,807
|
-
|
||||||||||||
Collateralized loan obligations
|
60,505
|
-
|
60,505
|
-
|
||||||||||||
Debt securities issued by foreign sovereign governments
|
120,539
|
120,539
|
-
|
-
|
||||||||||||
Total debt securities
|
5,017,288
|
907,306
|
4,107,412
|
2,570
|
||||||||||||
Equity securities
|
2,884
|
2,563
|
-
|
321
|
||||||||||||
Total investments
|
$
|
5,020,172
|
$
|
909,869
|
$
|
4,107,412
|
$
|
2,891
|
||||||||
Real estate acquired (1)
|
$
|
12,376
|
$
|
-
|
$
|
-
|
$
|
12,376
|
Fair Value
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
December 31, 2012
|
||||||||||||||||
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
866,251
|
$
|
866,251
|
$
|
-
|
$
|
-
|
||||||||
Obligations of U.S. states and political subdivisions
|
812,394
|
-
|
809,264
|
3,130
|
||||||||||||
Corporate debt securities
|
1,480,941
|
-
|
1,463,827
|
17,114
|
||||||||||||
Asset-backed securities
|
324,436
|
-
|
324,436
|
-
|
||||||||||||
Residential mortgage-backed securities
|
450,909
|
-
|
450,909
|
-
|
||||||||||||
Commercial mortgage-backed securities
|
150,342
|
-
|
150,342
|
-
|
||||||||||||
Debt securities issued by foreign sovereign governments
|
142,066
|
142,066
|
-
|
-
|
||||||||||||
Total debt securities
|
4,227,339
|
1,008,317
|
3,198,778
|
20,244
|
||||||||||||
Equity securities
|
2,936
|
2,615
|
-
|
321
|
||||||||||||
Total investments
|
$
|
4,230,275
|
$
|
1,010,932
|
$
|
3,198,778
|
$
|
20,565
|
||||||||
Real estate acquired (1)
|
$
|
3,463
|
$
|
-
|
$
|
-
|
$
|
3,463
|
Obligations of U.S.
States and Political
Subdivisions
|
Corporate Debt
Securities
|
Equity
Securities
|
Total
Investments
|
Real Estate
Acquired
|
||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||
Balance at June 30, 2013
|
$
|
2,811
|
$
|
-
|
$
|
321
|
$
|
3,132
|
$
|
8,741
|
||||||||||
Total realized/unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings and reported as losses incurred, net
|
-
|
-
|
-
|
-
|
(1,378
|
)
|
||||||||||||||
Purchases
|
-
|
-
|
-
|
-
|
10,857
|
|||||||||||||||
Sales
|
(241
|
)
|
-
|
-
|
(241
|
)
|
(5,844
|
)
|
||||||||||||
Transfers into Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance at September 30, 2013
|
$
|
2,570
|
$
|
-
|
$
|
321
|
$
|
2,891
|
$
|
12,376
|
||||||||||
|
||||||||||||||||||||
Amount of total losses included in earnings for the three months ended September 30, 2013 attributable to the change in unrealized losses on assets still held at September 30, 2013
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Obligations of U.S.
States and Political
Subdivisions
|
Corporate
Debt Securities
|
Equity
Securities
|
Total
Investments
|
Real Estate
Acquired
|
||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||
Balance at December 31, 2012
|
$
|
3,130
|
$
|
17,114
|
$
|
321
|
$
|
20,565
|
$
|
3,463
|
||||||||||
Total realized/unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings and reported as realized investment gains (losses), net
|
-
|
(225
|
)
|
-
|
(225
|
)
|
-
|
|||||||||||||
Included in earnings and reported as losses incurred, net
|
-
|
-
|
-
|
-
|
(3,680
|
)
|
||||||||||||||
Purchases
|
30
|
-
|
-
|
30
|
28,401
|
|||||||||||||||
Sales
|
(590
|
)
|
(16,889
|
)
|
-
|
(17,479
|
)
|
(15,808
|
)
|
|||||||||||
Transfers into Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance at September 30, 2013
|
$
|
2,570
|
$
|
-
|
$
|
321
|
$
|
2,891
|
$
|
12,376
|
||||||||||
|
||||||||||||||||||||
Amount of total losses included in earnings for the nine months ended September 30, 2013 attributable to the change in unrealized losses on assets still held at September 30, 2013
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Obligations of U.S.
States and Political
Subdivisions
|
Corporate Debt
Securities
|
Equity
Securities
|
Total
Investments
|
Real Estate
Acquired
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Balance at June 30, 2012
|
$
|
83,981
|
$
|
40,857
|
$
|
321
|
$
|
125,159
|
$
|
3,074
|
||||||||||
Total realized/unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings and reported as realized investment gains (losses), net
|
(467
|
)
|
-
|
-
|
(467
|
)
|
-
|
|||||||||||||
Included in earnings and reported as impairment losses, net
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Included in earnings and reported as losses incurred, net
|
-
|
-
|
-
|
-
|
(309
|
)
|
||||||||||||||
Included in other comprehensive income
|
971
|
68
|
-
|
1,039
|
-
|
|||||||||||||||
Purchases
|
-
|
-
|
-
|
-
|
2,718
|
|||||||||||||||
Sales
|
(10,690
|
)
|
-
|
-
|
(10,690
|
)
|
(2,386
|
)
|
||||||||||||
Transfers into Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance at September 30, 2012
|
$
|
73,795
|
$
|
40,925
|
$
|
321
|
$
|
115,041
|
$
|
3,097
|
||||||||||
|
||||||||||||||||||||
Amount of total losses included in earnings for the three months ended September 30, 2012 attributable to the change in unrealized losses on assets still held at September 30, 2012
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Obligations of U.S.
States and Political
Subdivisions
|
Corporate Debt
Securities
|
Equity
Securities
|
Total
Investments
|
Real Estate
Acquired
|
||||||||||||||||
|
(In thousands)
|
|||||||||||||||||||
Balance at December 31, 2011
|
$
|
114,226
|
$
|
60,228
|
$
|
321
|
$
|
174,775
|
$
|
1,621
|
||||||||||
Total realized/unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings and reported as realized investment gains (losses), net
|
(2,992
|
)
|
(1,081
|
)
|
-
|
(4,073
|
)
|
-
|
||||||||||||
Included in earnings and reported as impairment losses, net
|
-
|
(339
|
)
|
-
|
(339
|
)
|
-
|
|||||||||||||
Included in earnings and reported as losses incurred, net
|
-
|
-
|
-
|
-
|
(774
|
)
|
||||||||||||||
Included in other comprehensive income
|
1,727
|
423
|
-
|
2,150
|
-
|
|||||||||||||||
Purchases
|
27
|
-
|
-
|
27
|
8,688
|
|||||||||||||||
Sales
|
(39,193
|
)
|
(18,306
|
)
|
-
|
(57,499
|
)
|
(6,438
|
)
|
|||||||||||
Transfers into Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance at September 30, 2012
|
$
|
73,795
|
$
|
40,925
|
$
|
321
|
$
|
115,041
|
$
|
3,097
|
||||||||||
|
||||||||||||||||||||
Amount of total losses included in earnings for the nine months ended September 30, 2012 attributable to the change in unrealized losses on assets still held at September 30, 2012
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Three Months Ended
|
||||||||||||||||
|
September 30, 2013
|
|||||||||||||||
|
Valuation
|
|||||||||||||||
|
Before tax
|
Tax effect
|
allowance
|
Net of tax
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Change in unrealized gains and losses on investments
|
$
|
7,163
|
$
|
(2,526
|
)
|
$
|
2,640
|
$
|
7,277
|
|||||||
Unrealized foreign currency translation adjustment
|
2,901
|
(1,016
|
)
|
-
|
1,885
|
|||||||||||
|
||||||||||||||||
Other comprehensive income (loss)
|
$
|
10,064
|
$
|
(3,542
|
)
|
$
|
2,640
|
$
|
9,162
|
|
Nine Months Ended
|
|||||||||||||||
|
September 30, 2013
|
|||||||||||||||
|
Valuation
|
|||||||||||||||
|
Before tax
|
Tax effect
|
allowance
|
Net of tax
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Change in unrealized gains and losses on investments
|
$
|
(102,468
|
)
|
$
|
35,586
|
$
|
(33,914
|
)
|
$
|
(100,796
|
)
|
|||||
Unrealized foreign currency translation adjustment
|
(15,868
|
)
|
5,557
|
-
|
(10,311
|
)
|
||||||||||
|
||||||||||||||||
Other comprehensive income (loss)
|
$
|
(118,336
|
)
|
$
|
41,143
|
$
|
(33,914
|
)
|
$
|
(111,107
|
)
|
|
Three Months Ended
|
|||||||||||||||
|
September 30, 2012
|
|||||||||||||||
|
Valuation
|
|||||||||||||||
|
Before tax
|
Tax effect
|
allowance
|
Net of tax
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Change in unrealized gains and losses on investments
|
$
|
47,368
|
$
|
(16,552
|
)
|
$
|
13,671
|
$
|
44,487
|
|||||||
Unrealized foreign currency translation adjustment
|
1,709
|
(600
|
)
|
-
|
1,109
|
|||||||||||
|
||||||||||||||||
Other comprehensive income (loss)
|
$
|
49,077
|
$
|
(17,152
|
)
|
$
|
13,671
|
$
|
45,596
|
Nine Months Ended
|
||||||||||||||||
|
September 30, 2012
|
|||||||||||||||
|
Valuation
|
|||||||||||||||
|
Before tax
|
Tax effect
|
allowance
|
Net of tax
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Change in unrealized gains and losses on investments
|
$
|
10,243
|
$
|
(3,462
|
)
|
$
|
-
|
$
|
6,781
|
|||||||
Unrealized foreign currency translation adjustment
|
2,260
|
(792
|
)
|
-
|
1,468
|
|||||||||||
|
||||||||||||||||
Other comprehensive income (loss)
|
$
|
12,503
|
$
|
(4,254
|
)
|
$
|
-
|
$
|
8,249
|
Three Months Ended
|
||||||||||||||||
|
September 30, 2013
|
|||||||||||||||
|
Unrealized gains and
|
|||||||||||||||
|
losses on available-
|
Defined benefit
|
Foreign currency
|
|||||||||||||
|
for-sale securities
|
plans
|
translation
|
Total
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Balance at June 30, 2013, before tax
|
$
|
(68,090
|
)
|
$
|
(71,804
|
)
|
$
|
13,978
|
$
|
(125,916
|
)
|
|||||
|
||||||||||||||||
Other comprehensive income (loss) before reclassifications
|
4,396
|
-
|
2,901
|
7,297
|
||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
(2,767
|
)
|
(1)
|
-
|
- |
(2,767
|
)
|
|||||||||
Net current period other comprehensive income (loss)
|
7,163
|
-
|
2,901
|
10,064
|
||||||||||||
|
||||||||||||||||
Balance at September 30, 2013, before tax
|
$
|
(60,927
|
)
|
$
|
(71,804
|
)
|
$
|
16,879
|
$
|
(115,852
|
)
|
Nine Months Ended
September 30, 2013 |
||||||||||||||||
Unrealized gains and
losses on available- |
Defined benefit
plans |
Foreign currency
translation |
Total
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Balance at December 31, 2012, before tax
|
$
|
41,541
|
$
|
(71,804
|
)
|
$
|
32,747
|
$
|
2,484
|
|||||||
|
||||||||||||||||
Other comprehensive income (loss) before reclassifications
|
(95,588
|
)
|
-
|
(15,868
|
)
|
(111,456
|
)
|
|||||||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
6,880
|
(1)
|
-
|
- |
6,880
|
|||||||||||
Net current period other comprehensive income (loss)
|
(102,468
|
)
|
-
|
(15,868
|
)
|
(118,336
|
)
|
|||||||||
|
||||||||||||||||
Balance at September 30, 2013, before tax
|
(60,927
|
)
|
(71,804
|
)
|
16,879
|
(115,852
|
)
|
|||||||||
|
||||||||||||||||
Tax effect (2)
|
(64,968
|
)
|
26,940
|
(5,390
|
)
|
(43,418
|
)
|
|||||||||
|
||||||||||||||||
Balance at September 30, 2013, net of tax
|
$
|
(125,895
|
)
|
$
|
(44,864
|
)
|
$
|
11,489
|
$
|
(159,270
|
)
|
Three Months Ended September 30,
|
||||||||||||||||
|
Pension and Supplemental
|
Other Postretirement
|
||||||||||||||
|
Executive Retirement Plans
|
Benefits
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Service cost
|
$
|
2,835
|
$
|
2,416
|
$
|
202
|
$
|
307
|
||||||||
Interest cost
|
3,823
|
4,120
|
155
|
286
|
||||||||||||
Expected return on plan assets
|
(5,035
|
)
|
(4,553
|
)
|
(919
|
)
|
(791
|
)
|
||||||||
Recognized net actuarial loss
|
1,536
|
1,457
|
-
|
199
|
||||||||||||
Amortization of prior service cost
|
125
|
166
|
(1,663
|
)
|
(1,554
|
)
|
||||||||||
|
||||||||||||||||
Net periodic benefit cost
|
$
|
3,284
|
$
|
3,606
|
$
|
(2,225
|
)
|
$
|
(1,553
|
)
|
|
Nine Months Ended September 30,
|
|||||||||||||||
|
Pension and Supplemental
|
Other Postretirement
|
||||||||||||||
|
Executive Retirement Plans
|
Benefits
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Service cost
|
$
|
8,504
|
$
|
7,247
|
$
|
609
|
$
|
920
|
||||||||
Interest cost
|
11,467
|
12,361
|
464
|
857
|
||||||||||||
Expected return on plan assets
|
(15,108
|
)
|
(13,659
|
)
|
(2,759
|
)
|
(2,372
|
)
|
||||||||
Recognized net actuarial loss
|
4,609
|
4,372
|
-
|
599
|
||||||||||||
Amortization of prior service cost
|
377
|
499
|
(4,987
|
)
|
(4,663
|
)
|
||||||||||
|
||||||||||||||||
Net periodic benefit cost
|
$
|
9,849
|
$
|
10,820
|
$
|
(6,673
|
)
|
$
|
(4,659
|
)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In thousands)
|
|||||||||||||||
|
||||||||||||||||
Tax benefit before valuation allowance
|
$
|
(674
|
)
|
$
|
(89,106
|
)
|
$
|
(17,792
|
)
|
$
|
(196,535
|
)
|
||||
Change in valuation allowance
|
1,010
|
86,134
|
20,257
|
192,035
|
||||||||||||
|
||||||||||||||||
Provision for (benefit from) income taxes
|
$
|
336
|
$
|
(2,972
|
)
|
$
|
2,465
|
$
|
(4,500
|
)
|
|
Nine Months Ended
|
|||||||
|
September 30,
|
|||||||
|
2013
|
2012
|
||||||
|
(In thousands)
|
|||||||
|
||||||||
Reserve at beginning of period
|
$
|
4,056,843
|
$
|
4,557,512
|
||||
Less reinsurance recoverable
|
104,848
|
154,607
|
||||||
Net reserve at beginning of period (1)
|
3,951,995
|
4,402,905
|
||||||
|
||||||||
Losses incurred:
|
||||||||
Losses and LAE incurred in respect of default notices related to:
|
||||||||
Current year
|
686,454
|
1,091,326
|
||||||
Prior years (2)
|
(43,783
|
)
|
287,291
|
|||||
Subtotal (3)
|
642,671
|
1,378,617
|
||||||
|
||||||||
Losses paid:
|
||||||||
Losses and LAE paid in respect of default notices related to:
|
||||||||
Current year
|
28,792
|
54,813
|
||||||
Prior years
|
1,286,833
|
1,840,992
|
||||||
Reinsurance terminations (4)
|
(3,332
|
)
|
(425
|
)
|
||||
Subtotal (5)
|
1,312,293
|
1,895,380
|
||||||
|
||||||||
Net reserve at end of period (6)
|
3,282,373
|
3,886,142
|
||||||
Plus reinsurance recoverables
|
70,621
|
117,859
|
||||||
|
||||||||
Reserve at end of period
|
$
|
3,352,994
|
$
|
4,004,001
|
(1) | At December 31, 2012 and 2011, the estimated reduction in loss reserves related to rescissions approximated $0.2 billion and $0.7 billion, respectively. |
(2) | A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves, and a positive number for prior year losses incurred indicates a deficiency of prior year loss reserves. |
(3) | Rescissions did not have a significant impact on incurred losses in the nine months ended September 30, 2013 or 2012. |
(4) | In a termination, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction to losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred. |
(5) | Rescissions mitigated our paid losses by an estimated $0.1 billion and $0.2 billion in the nine months ended September 30, 2013 and 2012, respectively, which excludes amounts that may have been applied to a deductible. |
(6) | At September 30, 2013 and 2012, the estimated reduction in loss reserves related to rescissions approximated $0.1 billion and $0.5 billion, respectively. |
|
Nine months ended September 30,
|
|||||||
|
2013
|
2012
|
||||||
|
(In millions)
|
|||||||
Prior year loss development (1):
|
||||||||
|
||||||||
Increase in estimated claim rate on primary defaults
|
$
|
10
|
$
|
300
|
||||
Decrease in estimated severity on primary defaults
|
(40
|
)
|
-
|
|||||
Change in estimates related to pool reserves, LAE reserves and reinsurance
|
(14
|
)
|
(13
|
)
|
||||
Total prior year loss development
|
$
|
(44
|
)
|
$
|
287
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Default inventory at beginning of period
|
117,105
|
153,990
|
139,845
|
175,639
|
||||||||||||
New Notices
|
27,755
|
34,432
|
81,044
|
101,454
|
||||||||||||
Cures
|
(24,105
|
)
|
(27,384
|
)
|
(80,677
|
)
|
(90,896
|
)
|
||||||||
Paids (including those charged to a deductible or captive)
|
(8,659
|
)
|
(11,344
|
)
|
(27,155
|
)
|
(34,991
|
)
|
||||||||
Rescissions and denials
|
(509
|
)
|
(809
|
)
|
(1,470
|
)
|
(2,321
|
)
|
||||||||
Default inventory at end of period
|
111,587
|
148,885
|
111,587
|
148,885
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||||||||||||||
|
2013
|
2012
|
2012
|
|||||||||||||||||||||
|
||||||||||||||||||||||||
Consecutive months in default
|
||||||||||||||||||||||||
3 months or less
|
20,144
|
18
|
%
|
23,282
|
17
|
%
|
25,593
|
17
|
%
|
|||||||||||||||
4 - 11 months
|
24,138
|
22
|
%
|
34,688
|
25
|
%
|
35,029
|
24
|
%
|
|||||||||||||||
12 months or more
|
67,305
|
60
|
%
|
81,875
|
58
|
%
|
88,263
|
59
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Total primary default inventory
|
111,587
|
100
|
%
|
139,845
|
100
|
%
|
148,885
|
100
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Primary claims received inventory included in ending default inventory (1)
|
9,858
|
9
|
%
|
11,731
|
8
|
%
|
12,508
|
8
|
%
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||||||||||||||
|
2013
|
2012
|
2012
|
|||||||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
3 payments or less
|
28,777
|
26
|
%
|
34,245
|
24
|
%
|
35,130
|
24
|
%
|
|||||||||||||||
4 - 11 payments
|
25,089
|
22
|
%
|
34,458
|
25
|
%
|
36,359
|
24
|
%
|
|||||||||||||||
12 payments or more
|
57,721
|
52
|
%
|
71,142
|
51
|
%
|
77,396
|
52
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Total primary default inventory
|
111,587
|
100
|
%
|
139,845
|
100
|
%
|
148,885
|
100
|
%
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
|
(In millions)
|
|||||||||||
Present value of expected future paid losses and expenses, net of expected future premium
|
$
|
(709
|
)
|
$
|
(840
|
)
|
$
|
(865
|
)
|
|||
|
||||||||||||
Established loss reserves
|
652
|
766
|
781
|
|||||||||
|
||||||||||||
Net deficiency
|
$
|
(57
|
)
|
$
|
(74
|
)
|
$
|
(84
|
)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30, 2013
|
|||||||||||||||
|
(In millions)
|
|||||||||||||||
|
||||||||||||||||
Premium Deficiency Reserve at beginning of period
|
$
|
(61
|
)
|
$
|
(74
|
)
|
||||||||||
|
||||||||||||||||
Paid claims and loss adjustment expenses
|
$
|
51
|
$
|
172
|
||||||||||||
Decrease in loss reserves
|
(37
|
)
|
(114
|
)
|
||||||||||||
Premium earned
|
(24
|
)
|
(72
|
)
|
||||||||||||
Effects of present valuing on future premiums, losses and expenses
|
-
|
(2
|
)
|
|||||||||||||
|
||||||||||||||||
Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized
|
(10
|
)
|
(16
|
)
|
||||||||||||
|
||||||||||||||||
Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)
|
14
|
33
|
||||||||||||||
|
||||||||||||||||
Premium Deficiency Reserve at end of period
|
$
|
(57
|
)
|
$
|
(57
|
)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30, 2012
|
|||||||||||||||
|
(In millions)
|
|||||||||||||||
|
||||||||||||||||
Premium Deficiency Reserve at beginning of period
|
$
|
(93
|
)
|
$
|
(135
|
)
|
||||||||||
|
||||||||||||||||
Paid claims and loss adjustment expenses
|
$
|
67
|
$
|
219
|
||||||||||||
Decrease in loss reserves
|
(25
|
)
|
(45
|
)
|
||||||||||||
Premium earned
|
(25
|
)
|
(77
|
)
|
||||||||||||
Effects of present valuing on future premiums,losses and expenses
|
(4
|
)
|
(8
|
)
|
||||||||||||
|
||||||||||||||||
Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized
|
13
|
89
|
||||||||||||||
|
||||||||||||||||
Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)
|
(4
|
)
|
(38
|
)
|
||||||||||||
|
||||||||||||||||
Premium Deficiency Reserve at end of period
|
$
|
(84
|
)
|
$
|
(84
|
)
|
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
· | Premiums written and earned |
· | New insurance written, which increases insurance in force, and is the aggregate principal amount of the mortgages that are insured during a period. Many factors affect new insurance written, including the volume of low down payment home mortgage originations and competition to provide credit enhancement on those mortgages, including competition from the FHA, other mortgage insurers, GSE programs that may reduce or eliminate the demand for mortgage insurance and other alternatives to mortgage insurance. In addition, new insurance written can be influenced by a lender’s assessment of the financial strength of our insurance operations. New insurance written does not include loans previously insured by us which are modified, such as loans modified under HARP. |
· | Cancellations, which reduce insurance in force. Cancellations due to refinancings are affected by the level of current mortgage interest rates compared to the mortgage coupon rates throughout the in force book. Refinancings are also affected by current home values compared to values when the loans in the in force book became insured and the terms on which mortgage credit is available. Cancellations also include rescissions, which require us to return any premiums received related to the rescinded policy, and policies cancelled due to claim payment, which require us to return any premium received from the date of default. Finally, cancellations are affected by home price appreciation, which can give homeowners the right to cancel the mortgage insurance on their loans. |
· | Premium rates, which are affected by the risk characteristics of the loans insured and the percentage of coverage on the loans. |
· | Premiums ceded under risk sharing arrangements. See Note 4 – “Reinsurance” to our consolidated financial statements for a discussion of our new quota share agreement, under which premiums will be ceded net of a profit commission. |
· | Investment income |
· | Losses incurred |
· | The state of the economy, including unemployment and housing values, each of which affects the likelihood that loans will become delinquent and whether loans that are delinquent cure their delinquency. The level of new delinquencies has historically followed a seasonal pattern, with new delinquencies in the first part of the year lower than new delinquencies in the latter part of the year, though this pattern can be affected by the state of the economy and local housing markets. |
· | The product mix of the in force book, with loans having higher risk characteristics generally resulting in higher delinquencies and claims. |
· | The size of loans insured, with higher average loan amounts tending to increase losses incurred. |
· | The percentage of coverage on insured loans, with deeper average coverage tending to increase incurred losses. |
· | Changes in housing values, which affect our ability to mitigate our losses through sales of properties with delinquent mortgages as well as borrower willingness to continue to make mortgage payments when the value of the home is below the mortgage balance. |
· | The rate at which we rescind policies. Our estimated loss reserves reflect mitigation from rescissions of policies and denials of claims. We collectively refer to such rescissions and denials as “rescissions” and variations of this term. |
· | The distribution of claims over the life of a book. Historically, the first two years after loans are originated are a period of relatively low claims, with claims increasing substantially for several years subsequent and then declining, although persistency (percentage of insurance remaining in force from one year prior), the condition of the economy, including unemployment and housing prices, and other factors can affect this pattern. For example, a weak economy or housing price declines can lead to claims from older books increasing, continuing at stable levels or experiencing a lower rate of decline. See further information under “Mortgage Insurance Earnings and Cash Flow Cycle” below. |
· | Changes in premium deficiency reserve |
· | Underwriting and other expenses |
· | Interest expense |
· | Net premiums written and earned |
· | Investment income |
· | Realized gains (losses) and other-than-temporary impairments |
· | Other revenue |
· | Losses incurred |
· | Change in premium deficiency reserve |
· | Underwriting and other expenses |
· | Interest expense |
· | Provision for income taxes |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
||||||||||||||||
Total Primary NIW (In billions)
|
$
|
8.6
|
$
|
7.0
|
$
|
23.1
|
$
|
17.1
|
||||||||
|
||||||||||||||||
Refinance volume as a % of primary
|
||||||||||||||||
NIW
|
18
|
%
|
32
|
%
|
30
|
%
|
34
|
%
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(In billions)
|
|||||||||||||||
|
||||||||||||||||
NIW
|
$
|
8.6
|
$
|
7.0
|
$
|
23.1
|
$
|
17.1
|
||||||||
Cancellations
|
(8.0
|
)
|
(8.8
|
)
|
(26.0
|
)
|
(25.1
|
)
|
||||||||
|
||||||||||||||||
Change in primary insurance in force
|
$
|
0.6
|
$
|
(1.8
|
)
|
$
|
(2.9
|
)
|
$
|
(8.0
|
)
|
|||||
|
||||||||||||||||
Direct primary insurance in force as of September 30,
|
$
|
159.2
|
$
|
164.9
|
||||||||||||
|
||||||||||||||||
Direct primary risk in force as of September 30,
|
$
|
41.1
|
$
|
42.5
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
|
||||||||||||
|
||||||||||||
Total loans delinquent (1)
|
111,587
|
139,845
|
148,885
|
|||||||||
Percentage of loans delinquent (default rate)
|
11.51
|
%
|
13.90
|
%
|
14.51
|
%
|
||||||
|
||||||||||||
Prime loans delinquent (2)
|
71,376
|
90,270
|
95,517
|
|||||||||
Percentage of prime loans delinquent (default rate)
|
8.44
|
%
|
10.44
|
%
|
10.90
|
%
|
||||||
|
||||||||||||
A-minus loans delinquent (2)
|
17,311
|
20,884
|
21,865
|
|||||||||
Percentage of A-minus loans delinquent (default rate)
|
30.62
|
%
|
32.92
|
%
|
33.19
|
%
|
||||||
|
||||||||||||
Subprime credit loans delinquent (2)
|
6,519
|
7,668
|
7,999
|
|||||||||
Percentage of subprime credit loans delinquent (default rate)
|
38.10
|
%
|
40.78
|
%
|
41.29
|
%
|
||||||
|
||||||||||||
Reduced documentation loans delinquent (3)
|
16,381
|
21,023
|
23,504
|
|||||||||
Percentage of reduced documentation loans delinquent (default rate)
|
32.41
|
%
|
35.23
|
%
|
36.16
|
%
|
September 30,
|
December 31,
|
September 30,
|
||||||||||
|
2013
|
2012
|
2012
|
|||||||||
|
||||||||||||
Primary:
|
||||||||||||
Direct loss reserves (in millions)
|
$
|
3,109
|
$
|
3,744
|
$
|
3,855
|
||||||
Ending default inventory
|
111,587
|
139,845
|
148,885
|
|||||||||
Average direct reserve per default
|
$
|
27,858
|
$
|
26,771
|
$
|
25,890
|
||||||
|
||||||||||||
Primary claims received inventory included in ending default inventory
|
9,858
|
11,731
|
12,508
|
|||||||||
|
||||||||||||
|
||||||||||||
Pool (1):
|
||||||||||||
Direct loss reserves (in millions):
|
||||||||||||
With aggregate loss limits (2)
|
$
|
88
|
$
|
120
|
$
|
123
|
||||||
Without aggregate loss limits
|
16
|
20
|
21
|
|||||||||
Reserves related to Freddie Mac Settlement (2)
|
136
|
167
|
-
|
|||||||||
Total pool direct loss reserves
|
$
|
240
|
$
|
307
|
$
|
144
|
||||||
|
||||||||||||
Ending default inventory:
|
||||||||||||
With aggregate loss limits (2)
|
5,743
|
7,243
|
7,987
|
|||||||||
Without aggregate loss limits
|
1,078
|
1,351
|
1,350
|
|||||||||
Total pool ending default inventory
|
6,821
|
8,594
|
9,337
|
|||||||||
|
||||||||||||
Pool claims received inventory included in ending default inventory
|
185
|
304
|
255
|
|||||||||
|
||||||||||||
Other gross reserves (in millions)
|
$
|
4
|
$
|
6
|
$
|
5
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
Region
|
2013
|
2012
|
2012
|
|||||||||
Great Lakes
|
12,930
|
16,538
|
17,675
|
|||||||||
Mid-Atlantic
|
5,821
|
6,948
|
7,167
|
|||||||||
New England
|
5,341
|
6,160
|
6,396
|
|||||||||
North Central
|
12,615
|
16,367
|
17,582
|
|||||||||
Northeast
|
15,741
|
17,553
|
17,659
|
|||||||||
Pacific
|
9,612
|
13,235
|
14,856
|
|||||||||
Plains
|
3,298
|
4,126
|
4,395
|
|||||||||
South Central
|
12,169
|
15,418
|
16,602
|
|||||||||
Southeast
|
34,060
|
43,500
|
46,553
|
|||||||||
Total
|
111,587
|
139,845
|
148,885
|
Primary Loss Reserves
|
||||||||||||
(In millions)
|
||||||||||||
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
Region
|
2013
|
2012
|
2012
|
|||||||||
Great Lakes
|
$
|
235
|
$
|
295
|
$
|
302
|
||||||
Mid-Atlantic
|
134
|
178
|
187
|
|||||||||
New England
|
151
|
144
|
152
|
|||||||||
North Central
|
372
|
445
|
449
|
|||||||||
Northeast
|
374
|
371
|
347
|
|||||||||
Pacific
|
461
|
599
|
635
|
|||||||||
Plains
|
56
|
69
|
72
|
|||||||||
South Central
|
223
|
301
|
324
|
|||||||||
Southeast
|
951
|
1,089
|
1,147
|
|||||||||
Total before IBNR and LAE
|
$
|
2,957
|
$
|
3,491
|
$
|
3,615
|
||||||
IBNR and LAE
|
152
|
253
|
240
|
|||||||||
Total
|
$
|
3,109
|
$
|
3,744
|
$
|
3,855
|
Great Lakes: IN, KY, MI, OH
|
Mid-Atlantic: DC, DE, MD, VA, WV
|
New England: CT, MA, ME, NH, RI, VT
|
North Central: IL, MN, MO, WI
|
Northeast: NJ, NY, PA
|
Pacific: CA, HI, NV, OR, WA
|
Plains: IA, ID, KS, MT, ND, NE, SD, WY
|
South Central: AK, AZ, CO, LA, NM, OK, TX, UT
|
Southeast: AL, AR, FL, GA, MS, NC, SC, TN
|
(In millions)
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
Flow
|
$
|
2,187
|
$
|
2,586
|
$
|
2,664
|
||||||
Bulk
|
770
|
905
|
951
|
|||||||||
Total primary reserves
|
$
|
2,957
|
$
|
3,491
|
$
|
3,615
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Florida
|
$
|
52,505
|
$
|
57,696
|
$
|
53,108
|
$
|
57,411
|
||||||||
California
|
83,027
|
86,196
|
84,855
|
87,464
|
||||||||||||
Illinois
|
46,904
|
47,146
|
48,001
|
47,713
|
||||||||||||
Washington
|
64,249
|
66,308
|
63,968
|
69,005
|
||||||||||||
Georgia
|
36,651
|
39,373
|
37,830
|
40,005
|
||||||||||||
All other states
|
40,803
|
42,085
|
40,678
|
42,862
|
||||||||||||
|
||||||||||||||||
All states
|
$
|
45,706
|
$
|
48,029
|
$
|
46,180
|
$
|
48,747
|
September 30,
|
December 31,
|
September 30,
|
||||||||||
|
2013
|
2012
|
2012
|
|||||||||
Total insurance in force
|
$
|
164,210
|
$
|
161,060
|
$
|
160,700
|
||||||
Prime (FICO 620 & >)
|
166,400
|
162,450
|
161,690
|
|||||||||
A-Minus (FICO 575-619)
|
127,780
|
128,850
|
129,430
|
|||||||||
Subprime (FICO < 575)
|
118,980
|
119,630
|
120,010
|
|||||||||
Reduced doc (All FICOs)(1)
|
183,500
|
188,210
|
191,180
|
Primary average loan size
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
Florida
|
$
|
172,000
|
$
|
171,884
|
$
|
173,126
|
||||||
California
|
283,085
|
281,288
|
282,276
|
|||||||||
Illinois
|
154,740
|
154,158
|
154,532
|
|||||||||
Washington
|
224,799
|
223,840
|
223,619
|
|||||||||
Georgia
|
153,299
|
150,611
|
150,171
|
|||||||||
All other states
|
155,976
|
152,499
|
151,879
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Prime (FICO 620 & >)
|
$
|
288
|
$
|
378
|
$
|
909
|
$
|
1,188
|
||||||||
A-Minus (FICO 575-619)
|
44
|
57
|
140
|
184
|
||||||||||||
Subprime (FICO < 575)
|
13
|
16
|
41
|
52
|
||||||||||||
Reduced doc (All FICOs)(1)
|
51
|
94
|
164
|
283
|
||||||||||||
Pool (2)
|
25
|
49
|
82
|
218
|
||||||||||||
Other
|
-
|
2
|
2
|
5
|
||||||||||||
Direct losses paid
|
421
|
596
|
1,338
|
1,930
|
||||||||||||
Reinsurance
|
(17
|
)
|
(21
|
)
|
(50
|
)
|
(70
|
)
|
||||||||
Net losses paid
|
404
|
575
|
1,288
|
1,860
|
||||||||||||
Net LAE paid
|
10
|
12
|
28
|
36
|
||||||||||||
Net losses and LAE paid before terminations
|
414
|
587
|
1,316
|
1,896
|
||||||||||||
Reinsurance terminations
|
-
|
-
|
(3
|
)
|
-
|
|||||||||||
Net losses and LAE paid
|
$
|
414
|
$
|
587
|
$
|
1,313
|
$
|
1,896
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
||||||||||||||||
Florida
|
$
|
77
|
$
|
83
|
$
|
220
|
$
|
235
|
||||||||
California
|
30
|
73
|
124
|
241
|
||||||||||||
Illinois
|
34
|
36
|
108
|
104
|
||||||||||||
Washington
|
20
|
16
|
57
|
49
|
||||||||||||
Georgia
|
12
|
24
|
47
|
79
|
||||||||||||
Michigan
|
13
|
27
|
47
|
88
|
||||||||||||
Ohio
|
15
|
18
|
47
|
53
|
||||||||||||
Arizona
|
12
|
29
|
46
|
95
|
||||||||||||
Nevada
|
11
|
20
|
37
|
70
|
||||||||||||
Maryland
|
14
|
12
|
37
|
34
|
||||||||||||
Pennsylvania
|
12
|
9
|
33
|
27
|
||||||||||||
Wisconsin
|
9
|
12
|
32
|
36
|
||||||||||||
North Carolina
|
10
|
13
|
29
|
38
|
||||||||||||
Minnesota
|
6
|
13
|
26
|
47
|
||||||||||||
Texas
|
7
|
17
|
26
|
54
|
||||||||||||
All other states
|
114
|
143
|
338
|
457
|
||||||||||||
|
$
|
396
|
$
|
545
|
$
|
1,254
|
$
|
1,707
|
||||||||
Other (Pool, LAE, Reinsurance)
|
18
|
42
|
59
|
189
|
||||||||||||
Net losses and LAE paid
|
$
|
414
|
$
|
587
|
$
|
1,313
|
$
|
1,896
|
|
||||||||||||
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
Florida
|
16,652
|
22,024
|
24,067
|
|||||||||
California
|
4,400
|
6,201
|
7,210
|
|||||||||
Illinois
|
6,992
|
9,313
|
10,010
|
|||||||||
Washington
|
2,210
|
3,053
|
3,253
|
|||||||||
Georgia
|
3,761
|
5,100
|
5,373
|
|||||||||
Arizona
|
3,593
|
4,808
|
5,238
|
|||||||||
Michigan
|
5,339
|
6,647
|
7,037
|
|||||||||
Ohio
|
1,392
|
2,161
|
2,590
|
|||||||||
Nevada
|
1,433
|
2,053
|
2,327
|
|||||||||
Maryland
|
2,948
|
3,486
|
3,583
|
|||||||||
Wisconsin
|
5,688
|
6,627
|
6,637
|
|||||||||
Pennsylvania
|
2,439
|
3,086
|
3,338
|
|||||||||
Minnesota
|
3,084
|
3,956
|
4,116
|
|||||||||
Texas
|
1,520
|
1,937
|
2,151
|
|||||||||
North Carolina
|
5,714
|
6,924
|
7,138
|
|||||||||
All other states
|
44,422
|
52,469
|
54,817
|
|||||||||
|
111,587
|
139,845
|
148,885
|
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
|
2013
|
2012
|
2012
|
|||||||||
Flow
|
85,232
|
107,497
|
113,339
|
|||||||||
Bulk
|
26,355
|
32,348
|
35,546
|
|||||||||
|
111,587
|
139,845
|
148,885
|
|
||||||||||||
|
September 30,
|
December 31,
|
September 30,
|
|||||||||
Policy year:
|
2013
|
2012
|
2012
|
|||||||||
2003 and prior
|
11,250
|
14,888
|
15,822
|
|||||||||
2004
|
6,480
|
8,142
|
8,532
|
|||||||||
2005
|
10,024
|
12,582
|
13,222
|
|||||||||
2006
|
14,630
|
18,257
|
19,167
|
|||||||||
2007
|
31,826
|
40,357
|
42,765
|
|||||||||
2008
|
9,557
|
11,914
|
12,568
|
|||||||||
2009
|
782
|
901
|
904
|
|||||||||
2010
|
320
|
264
|
241
|
|||||||||
2011
|
216
|
148
|
98
|
|||||||||
2012
|
129
|
44
|
20
|
|||||||||
2013
|
18
|
-
|
-
|
|||||||||
|
85,232
|
107,497
|
113,339
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
||||||||||||||||
Loss ratio
|
77.7
|
%
|
184.0
|
%
|
89.7
|
%
|
178.7
|
%
|
||||||||
Underwriting expense ratio
|
18.1
|
%
|
13.6
|
%
|
17.9
|
%
|
15.6
|
%
|
||||||||
Combined ratio
|
95.8
|
%
|
197.6
|
%
|
107.6
|
%
|
194.3
|
%
|
September 30,
|
December 31,
|
September 30,
|
||||||||||
2013
|
2012
|
2012
|
||||||||||
AAA
|
44
|
%
|
52
|
%
|
33
|
%
|
||||||
AA
|
18
|
%
|
15
|
%
|
21
|
%
|
||||||
A
|
27
|
%
|
22
|
%
|
31
|
%
|
||||||
BBB
|
11
|
%
|
11
|
%
|
15
|
%
|
||||||
Investment grade
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Below investment grade
|
-
|
-
|
-
|
|||||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
· | our investment portfolio (which is discussed in “Financial Condition” above), and interest income on the portfolio, |
· | net premiums that we will receive from our existing insurance in force as well as policies that we write in the future and |
· | amounts that we expect to recover from risk sharing arrangements (which is discussed in “Results of Consolidated Operations – Risk sharing arrangements” above). |
· | claim payments under MGIC’s mortgage guaranty insurance policies, |
· | $83 million of 5.375% Senior Notes due in November 2015, |
· | $345 million of 5% Convertible Senior Notes due in 2017, |
· | $500 million of 2% Convertible Senior Notes due in 2020, |
· | $390 million of 9% Convertible Junior Debentures due in 2063, |
· | interest on the foregoing debt instruments, and |
· | the other costs and operating expenses of our business. |
For the Nine Months Ended September 30,
|
||||||||
|
2013
|
2012
|
||||||
|
(In thousands)
|
|||||||
Total cash (used in) provided by:
|
||||||||
Operating activities
|
$
|
(692,616
|
)
|
$
|
(1,172,522
|
)
|
||
Investing activities
|
(1,007,664
|
)
|
960,234
|
|||||
Financing activities
|
1,130,725
|
(53,107
|
)
|
|||||
|
||||||||
Decrease in cash and cash equivalents
|
$
|
(569,555
|
)
|
$
|
(265,395
|
)
|
· | $83 million in par value of 5.375% Senior Notes due in November 2015, with an annual interest cost of $5 million; |
· | $345 million in par value of 5% Convertible Senior Notes due in 2017, with an annual interest cost of $17 million; |
· | $500 million in par value of 2% Convertible Senior Notes due in 2020, with an annual interest cost of $10 million; and |
· | $390 million in par value of 9% Convertible Junior Debentures due in 2063, with an annual interest cost of $35 million |
|
September 30,
|
December 31,
|
||||||
|
2013
|
2012
|
||||||
|
(In millions, except ratio)
|
|||||||
|
||||||||
Risk in force - net (1)
|
$
|
29,931
|
$
|
30,802
|
||||
|
||||||||
Statutory policyholders' surplus
|
$
|
1,451
|
$
|
689
|
||||
Statutory contingency reserve
|
46
|
-
|
||||||
|
||||||||
Statutory policyholders' position
|
$
|
1,497
|
$
|
689
|
||||
|
||||||||
|
||||||||
Risk-to-capital
|
20.0:1
|
44.7:1
|
|
September 30,
|
December 31,
|
||||||
|
2013
|
2012
|
||||||
|
(In millions, except ratio)
|
|||||||
|
||||||||
Risk in force - net (1)
|
$
|
35,717
|
$
|
36,113
|
||||
|
||||||||
Statutory policyholders' surplus
|
$
|
1,512
|
$
|
749
|
||||
Statutory contingency reserve
|
64
|
6
|
||||||
|
||||||||
Statutory policyholders' position
|
$
|
1,576
|
$
|
755
|
||||
|
||||||||
|
||||||||
Risk-to-capital
|
22.7:1
|
47.8:1
|
Payments due by period
|
||||||||||||||||||||
Contractual Obligations (In millions):
|
Less than
|
More than
|
||||||||||||||||||
|
Total
|
1 year
|
1-3 years
|
3-5 years
|
5 years
|
|||||||||||||||
Long-term debt obligations
|
$
|
3,220
|
$
|
67
|
$
|
214
|
$
|
452
|
$
|
2,487
|
||||||||||
Operating lease obligations
|
7
|
4
|
2
|
1
|
-
|
|||||||||||||||
Tax obligations
|
18
|
-
|
-
|
18
|
-
|
|||||||||||||||
Purchase obligations
|
2
|
1
|
1
|
-
|
-
|
|||||||||||||||
Pension, SERP and other post-retirement
|
||||||||||||||||||||
benefit plans
|
174
|
11
|
27
|
31
|
105
|
|||||||||||||||
Other long-term liabilities
|
3,353
|
1,710
|
1,375
|
268
|
-
|
|||||||||||||||
|
||||||||||||||||||||
Total
|
$
|
6,774
|
$
|
1,793
|
$
|
1,619
|
$
|
770
|
$
|
2,592
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
· | lenders using government mortgage insurance programs, including those of the FHA and the Veterans Administration, |
· | lenders and other investors holding mortgages in portfolio and self-insuring, |
· | investors (including the GSEs) using risk mitigation techniques other than private mortgage insurance, such as credit-linked note transactions executed in the capital markets; using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage; or accepting credit risk without credit enhancement, and |
· | lenders originating mortgages using piggyback structures to avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ratio and a second mortgage with a 10%, 15% or 20% loan-to-value ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather than a first mortgage with a 90%, 95% or 100% loan-to-value ratio that has private mortgage insurance. |
· | Genworth Mortgage Insurance Corporation, |
· | United Guaranty Residential Insurance Company, |
· | Radian Guaranty Inc., |
· | CMG Mortgage Insurance Company (whose owners have agreed to sell it to a worldwide insurer and reinsurer), |
· | Essent Guaranty, Inc., and |
· | NMI Holdings, Inc. |
Item 6.
|
Exhibits
|
MGIC INVESTMENT CORPORATION
|
|
|
|
/s/ J. Michael Lauer
|
|
J. Michael Lauer
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
|
|
/s/ Timothy J. Mattke
|
|
Timothy J. Mattke
|
|
Senior Vice President, Controller and Chief Accounting Officer
|
Exhibit
|
|
Number
|
Description of Exhibit
|
|
|
Amendment to Confidential Settlement Agreement and Release made as of September 24, 2013 by and between Mortgage Guaranty Insurance Corporation and Bank of America, N.A. (as a successor to BAC Home Loans Servicing f/k/a Countrywide Home Loans Servicing LP), on its own behalf and as successor in interest by de jure merger to Countrywide Bank FSB, formerly Treasury Bank. Countrywide Home Loans, Inc. is also a party to the settlement agreement only to the extent specified in the settlement agreement. †††
|
|
|
|
Amendment to Confidential Settlement Agreement and Release made as of September 24, 2013 by and between Mortgage Guaranty Insurance Corporation, Countrywide Home Loans, Inc. and Bank of America, N.A., in its capacity as master servicer or servicer of Subject Loans (as defined in the settlement agreement). †††
|
|
|
|
Certification of CEO under Section 302 of Sarbanes-Oxley Act of 2002
|
|
|
|
Certification of CFO under Section 302 of Sarbanes-Oxley Act of 2002
|
|
|
|
Certification of CEO and CFO under Section 906 of Sarbanes-Oxley Act of 2002 (as indicated in Item 6 of Part II, this Exhibit is not being "filed")
|
|
|
|
Risk Factors included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, as supplemented by Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2013, and through updating of various statistical and other information
|
|
|
|
101
|
The following financial information from MGIC Investment Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, (iv) Consolidated Statements of Shareholders’ Equity for the year ended December 31, 2012 and the nine months ended September 30, 2013, (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012, and (vi) the Notes to Consolidated Financial Statements.
|
†††
|
Confidential treatment has been requested with respect to certain portions of these exhibits. These exhibits omit the information subject to this confidentiality request. Omitted portions have been filed separately with the Securities and Exchange Commission.
|
1. | Compensation for Recently Paid Loans. Subclause (x) of Section 7(b)(i)(B) is amended and restated as follows: “(x) the Settlement Percentage applicable to the Class 2 GSE Loans, and”. |
2. | Designation of Category. Bank of America’s reconciliation of data after the Signing Date revealed that 948 loans referred to in clauses (i) - (iv) below should be classified as Class 1 GSE Loans rather than Class 2 GSE Loans as of the Signing Date, and Bank of America, CHL and MGIC agree that (i) the designation of the Category of each of the 887 Subject Loans listed on Appendix I, attached hereto, each of which was listed on Schedule 1 as of the Signing Date as a Class 2 GSE Loan, is changed to a Class 1 GSE Loan, and such Covered Loan shall be deemed to have been included on Schedule 1 as a Class 1 GSE Loan as of the Signing Date; (ii) the designation of the 16 Subject Loans listed on Appendix II, attached hereto, each of which was listed on Schedule 2 as of the Signing Date as a Class 2 GSE Loan, is changed to a Class 1 GSE Loan, and each such Past Coverage Determination Loan shall be deemed to have been included on Schedule 2 as a Class 1 GSE Loan as of the Signing Date; (iii) the designation of the 44 Subject Loans listed on Appendix III, attached hereto, each of which was listed on Schedule 3 as of the Signing Date as a Class 2 GSE Loan, is changed to a Class 1 GSE Loan, and each such Recently Paid Loan shall be deemed to have been included on Schedule 3 as a Class 1 GSE Loan as of the Signing Date; and (iv) the designation of the 1 Subject Loan listed on Appendix IV, attached hereto, which was listed on Schedule 9 as of the Signing Date as a Class 2 GSE Loan, is changed to a Class 1 GSE Loan, and each such Recently Denied Loan shall be deemed to have been included on Schedule 9 as a Class 1 GSE Loan as of the Signing Date. |
3. | Settlement Payment and Denial Settlement Payment for Class 1 GSE Loans and Class 2 GSE Loans and Reimbursement Payment. |
a. | Sections 2(a)(i), (ii) and (iii) are amended and restated as follows: |
(A) | [***] (applicable Settlement Payment after deductions) (calculated by: [***] (applicable Settlement Payment before deductions) less [***] (the sum of premium refund checks and premium refunds that have escheated to the states pursuant to applicable law)); and |
(B) | [***] (applicable Denial Settlement Payment);” |
b. | The Parties shall promptly notify the Escrow Agent of the amended and restated amounts of the Settlement Payment and the Denial Settlement Payment with respect to the Class 1 GSE Loans and the Class 2 GSE Loans and shall jointly direct the Escrow Agent to revise its records regarding the Categories of Loans with respect to MGIC’s deposits into the Escrow Account accordingly. The amended and restated amounts with respect to the Settlement Payment and the Denial Settlement Payment allocated to the Class 1 GSE Loans and the Class 2 GSE Loans in the Escrow Accounts shall be deemed to have been allocated to the Class 1 GSE Loans and Class 2 GSE Loans, respectively, as of the Signing Date. |
c. | Section 1(kkk) is amended and restated as follows: “‘Reimbursement Payment’ means, for Class 1 GSE Loans and HFI Loans that are Recently Paid Loans, the amount of [***], to be deposited to the Escrow Accounts by Bank of America as set forth in Section 2(b), and disbursed as set forth in Section 8.” |
d. | The Parties shall promptly notify the Escrow Agent of the amended and restated amount of the Reimbursement Payment, and concurrently therewith Bank of America shall deposit the difference between (x) the amount of the Reimbursement Payment as of the Signing Date and (y) the amended and restated amount of the Reimbursement Payment set forth in this Amendment in immediately available funds into the second of the Escrow Accounts. |
4. | Compensation for Recently Paid Loans. Subclause (y) of Section 7(a) is amended by adding the following words at the end of subclause (y): “that were included in the calculation of the Reimbursement Payment.” |
5. | Effect of DPO. The following is added at the end of Section 10(c)(v): “further provided that (x) in the event that MGIC becomes subject to a DPO, and for the duration of the DPO, MGIC shall pay only the Settlement Percentage Claim Payment with respect to each Class 1 GSE Loan and Bank of America shall pay the Bank of America Share directly to the applicable GSE, (y) the funds shall be disbursed from the MGIC Account in the manner contemplated by subclauses (i) and (ii) of Section 10(d)(iii)(G) in no event more than five (5) business days after delivery by MGIC to Bank of America of a Bank of America Share Report, and (z) upon the termination of any such DPO, (i) Bank of America shall re-establish the MGIC Account pursuant to Section 10(d)(ii) and make any adjustments pursuant to Section 10(d)(iii)(C), taking into account the average aggregate Bank of America Share paid by Bank of America or MGIC, shown on the Bank of America Share Reports delivered by MGIC to Bank of America during the preceding calendar year, and (ii) MGIC shall resume (A) payment of the Bank of America Share pursuant to this Section 10(c)(v) and (B) withdrawals from the MGIC Account pursuant to Section 10(d)(iii). The Parties intend, and no Party will dispute, that (1) the funds contained within the MGIC Account are not assets (whether general assets or otherwise) of MGIC and (2) to the extent that any funds contained within the MGIC Account are deemed or determined to be assets of MGIC by any court, governmental agency or regulatory body, Bank of America shall have a secured claim, as such term is defined in Wisconsin Statute section 645.03(1)(j), in such funds.” |
6. | Supplemental Claims. |
a. | Section 1(o) is amended and restated as follows: “‘Claim’ (A) has, with respect to any Subject Loan, the meaning set forth in the applicable Master Policy and (B) when used in reference to a Covered Loan or a Recently Paid Loan, also means a Supplemental Claim.” |
b. | The following Section 1(aaaa) is added: “‘Default Servicing Guide’ means MGIC’s Default Servicing Guide in effect at June 2013, a copy of which is attached as Exhibit O hereto.” |
c. | The following Section 1(bbbb) is added: “‘Supplemental Claim’ means a supplemental claim for items the Insured must advance under Section 5.7 of the applicable Master Policy, which supplemental claim is made after the date on which the Claim to which such supplemental claim relates is initially paid.” |
d. | The following Section 10(g) is added: “Supplemental Claims for Certain Loans: MGIC shall make payment pursuant to the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims on valid and allowable Supplemental Claims on Covered Loans and Recently Paid Loans received by MGIC within 90 days of the initial Claim payment date at the Settlement Percentage in the same manner as claims for Covered Loans. If, however, MGIC’s customary practice as to any particular type of Supplemental Claim is to waive the fact that the Supplemental Claim has not been received within 90 days of the initial Claim payment date, it shall follow that customary practice for purposes of Supplemental Claims of that type received pursuant to this Section 10(g). Any disputes regarding payment on Supplemental Claims, other than a dispute regarding the application of the preceding sentence, shall be resolved as described in the final sentence of Section 11(a), and any disputes regarding the application of the preceding sentence shall be resolved pursuant to Section 11(c).” |
7. | Alternative Dispute Resolution. |
a. | The following shall be added at the end of Section 11(a): “All disputes regarding any disallowance of a Supplemental Claim by MGIC in respect of any Covered Loan or Recently Paid Loan shall be resolved in the same manner and subject to the same conditions and limitations as disputes regarding an Exclusion, including without limitation, including such dispute in a Claim Group; provided, however, that for purposes of resolving disputes about disallowance of Supplemental Claims, (i) any reference to an ‘Exclusion’ shall instead be to a ‘disallowance of a Supplemental Claim’, (ii) the bases for the disallowance of a Supplemental Claim shall be those contained in the terms of the applicable Master Policy, the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims and this Settlement Agreement, and (iii) the arbitrator shall be bound by the terms of this Settlement Agreement, the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims, and the applicable Master Policy.” |
b. | Section 13(d)(i) is amended and restated as follows: “(i) Any disputes or claims within the scope of Sections 11(a) and (b), any Dispute within the scope of Section 11(c), and any Payment Dispute within the scope of Section 11(d);”. |
c. | Section 14(d)(i) is amended and restated as follows: “(i) Any disputes or claims within the scope of Sections 11(a) and (b), any Dispute within the scope of Section 11(c), and any Payment Dispute within the scope of Section 11(d);”. |
8. | Indemnification. |
a. | The following words are deleted from Section 15(b)(i): “[***]”. |
b. | The lead-in paragraph of Section 15(b) is amended and restated as follows: “On and after the Initial Implementation Date, Bank of America shall indemnify all MGIC Released Parties from and against all Causes of Action asserted by [***] directly or indirectly, by reason of, arising out of or resulting from the actual or claimed obligation to pay any amount of money in respect of:”. |
c. | The word “or” following clause (E) of the proviso following Section 15(b)(iii) is deleted. |
d. | Clause (F) of the proviso following Section 15(b)(iii) is amended and restated as follows: “(F)any action or inaction by CHL, except that this clause (F) shall not apply to a Cause of Action asserted involving any matter referred to in Section 15(b)(i) or (iii); or”. |
e. | The following new clause shall be added to the end of the proviso following section 15(b)(iii): “(G) Any obligation of MGIC to pay a Supplemental Claim pursuant to Section 10(g).” |
9. | Settlement Agreement. The Parties hereby affirm all other terms, provisions, and conditions of the Settlement Agreement. All references in the Settlement Agreement to the Settlement Agreement shall mean the Settlement Agreement as amended by this Amendment. |
10. | Governing Law. This Amendment and any Cause of Action arising under or related to this Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the law of conflicts. |
11. | Interpretation. This Amendment shall not be construed against any Party, but shall be construed as if the Parties jointly prepared the Amendment and any uncertainty and ambiguity shall not be interpreted against any one Party. |
12. | Severability. If any provision of this Amendment is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Amendment shall remain in full force and effect and shall be binding upon the Parties. |
13. | Representations and Warranties. Each of the Parties (and for purposes of this Section 13, CHL is included as a Party) represents that: (1) it has full power and authority to execute and deliver this Amendment and to perform its obligations under the Amendment; (2) it has taken all necessary corporate action to authorize the execution and delivery of this Amendment and the performance of its duties and obligations contemplated hereby, (3) none of such execution, delivery, or performance of this Amendment and the transactions contemplated hereby: (A) conflicts with the obligations of such Party under any material agreement binding upon it; (B) requires any authorization, consent or approval by, or registration, declaration or filing with, or notice to, any governmental authority, agency or instrumentality, or any third party, except for (i) any authorization, consent, approval, registration, declaration, filing, or notice that has been obtained or given prior to the date hereof and (ii) the Required Consents; (C) results in, or requires, the creation or imposition of any lien or other charge upon or with respect to any of the assets now owned or hereafter acquired by a Party, and (4) this Amendment, upon execution and delivery, is a valid and binding agreement, enforceable against it in accordance with the terms of the Settlement Agreement, as amended by this Amendment, subject to applicable bankruptcy, insolvency, reorganization, moratorium, insurers’ rehabilitation and liquidation, and other similar laws affecting creditor’s rights generally and general principles of equity. |
14. | Counterparts. This Amendment may be executed in counterparts, and when each Party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with the other signed counterparts, shall constitute one agreement, which shall be binding upon and effective as to all Parties. Signatures of the Parties transmitted by fax or .pdf shall be deemed to be their original signatures for all purposes. |
MORTGAGE GUARANTY INSURANCE CORPORATION
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BANK OF AMERICA, N.A.
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/s/ Patrick Sinks
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/s/ John S. Cousins
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Name: Patrick Sinks
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Name: John S. Cousins
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Title: President/Chief Operating Officer
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Title: Senior Vice President
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COUNTRYWIDE HOME LOANS, INC.
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/s/ David A. Cassell
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||
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Title: Senior Vice President
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1. | Compensation for Recently Paid Loans. Subclause (x) of Section 7(a)(ii) is amended and restated as follows: “(x) the Settlement Percentage applicable to the Category of the True-Up Loan, and”. |
2. | Supplemental Claims. |
a. | Section 1(l) is amended and restated as follows: “‘Claim’ (A) has, with respect to any Subject Loan, the meaning set forth in the applicable Master Policy and (B) when used in reference to a Covered Loan or a Recently Paid Loan, also means a Supplemental Claim.” |
b. | The following Section 1(yyy) is added: “‘Default Servicing Guide’ means MGIC’s Default Servicing Guide in effect at June 2013, a copy of which is attached as Exhibit M hereto.” |
c. | The following Section 1(zzz) is added: “‘Supplemental Claim’ means a supplemental claim for items the Insured must advance under Section 5.7 of the applicable Master Policy, which supplemental claim is made after the date on which the Claim to which such supplemental claim relates is initially paid.” |
d. | The following Section 10(f) is added: “Supplemental Claims for Certain Loans: MGIC shall make payment pursuant to the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims on valid and allowable Supplemental Claims on Covered Loans and Recently Paid Loans received by MGIC within 90 days of the initial Claim payment date at the Settlement Percentage in the same manner as claims for Covered Loans. If, however, MGIC’s customary practice as to any particular type of Supplemental Claim is to waive the fact that the Supplemental Claim has not been received within 90 days of the initial Claim payment date, it shall follow that customary practice for purposes of Supplemental Claims of that type received pursuant to this Section 10(f). Any disputes regarding payment on Supplemental Claims, other than a dispute regarding the application of the preceding sentence, shall be resolved as described in the final sentence of Section 11(a), and any disputes regarding the application of the preceding sentence shall be resolved pursuant to Section 11(c).” |
3. | Alternative Dispute Resolution. |
a. | The following shall be added at the end of Section 11(a): “All disputes regarding any disallowance of a Supplemental Claim by MGIC in respect of any Covered Loan or Recently Paid Loan shall be resolved in the same manner and subject to the same conditions and limitations as disputes regarding an Exclusion, including without limitation, including such dispute in a Claim Group; provided, however, that for purposes of resolving disputes about disallowance of Supplemental Claims, (i) any reference to an ‘Exclusion’ shall instead be to a ‘disallowance of a Supplemental Claim’, (ii) the bases for the disallowance of a Supplemental Claim shall be those contained in the terms of the applicable Master Policy, the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims and this Settlement Agreement, and (iii) the arbitrator shall be bound by the terms of this Settlement Agreement, the provisions of the Default Servicing Guide relevant to the filing and paying of Supplemental Claims, and the applicable Master Policy.” |
b. | Section 13(d)(i) is amended and restated as follows: “(i) Any disputes or claims within the scope of Sections 11(a) and (b), and any Dispute within the scope of Section 11(c);”. |
c. | Section 14(d)(i) is amended and restated as follows: “(i) Any disputes or claims within the scope of Sections 11(a) and (b), and any Dispute within the scope of Section 11(c);”. |
4. | Indemnification. |
a. | The following words are deleted from Section 15(b)(i): “[***]”. |
b. | The word “or” following clause (F) of the proviso following Section 15(b)(iii) is deleted. |
c. | Clause (F) of the proviso following Section 15(b)(iii) is amended to delete the period and to add “or;” at the end of the Clause. |
d. | The following new clause shall be added to the end of the proviso following section 15(b)(iii): “(G) Any obligation of MGIC to pay a Supplemental Claim pursuant to Section 10(g).” |
5. | Settlement Agreement. The Parties hereby affirm all other terms, provisions, and conditions of the Settlement Agreement. All references in the Settlement Agreement to the Settlement Agreement shall mean the Settlement Agreement as amended by this Amendment. |
6. | Governing Law. This Amendment and any Cause of Action arising under or related to this Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the law of conflicts. |
7. | Interpretation. This Amendment shall not be construed against any Party, but shall be construed as if the Parties jointly prepared the Amendment and any uncertainty and ambiguity shall not be interpreted against any one Party. |
8. | Severability. If any provision of this Amendment is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Amendment shall remain in full force and effect and shall be binding upon the Parties. |
9. | Representations and Warranties. Each of the Parties represents that: (1) it has full power and authority to execute and deliver this Amendment and to perform its obligations under the Amendment; (2) it has taken all necessary corporate action to authorize the execution and delivery of this Amendment and the performance of its duties and obligations contemplated hereby; (3) none of such execution, delivery, or performance of this Amendment and the transactions contemplated hereby: (A) conflicts with the obligations of such Party under any material agreement binding upon it; (B) requires any authorization, consent or approval by, or registration, declaration or filing with, or notice to, any governmental authority, agency or instrumentality, or any third party, except for (i) any authorization, consent, approval, registration, declaration, filing, or notice that has been obtained or given prior to the date hereof and (ii) the Required Consents; (C) results in, or requires, the creation or imposition of any lien or other charge upon or with respect to any of the assets now owned or hereafter acquired by a Party; and (4) this Amendment, upon execution and delivery, is a valid and binding agreement, enforceable against it in accordance with the terms of the Settlement Agreement, as amended by this Amendment, subject to applicable bankruptcy, insolvency, reorganization, moratorium, insurers’ rehabilitation and liquidation, and other similar laws affecting creditor’s rights generally and general principles of equity. |
10. | Counterparts. This Amendment may be executed in counterparts, and when each Party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with the other signed counterparts, shall constitute one agreement, which shall be binding upon and effective as to all Parties. Signatures of the Parties transmitted by fax or .pdf shall be deemed to be their original signatures for all purposes. |
MORTGAGE GUARANTY INSURANCE CORPORATION
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COUNTRYWIDE HOME LOANS, INC.
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|
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/s/ Patrick Sinks
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/s/ David A. Cassell
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Name: Patrick Sinks
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Name: David A. Cassell
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Title: President/Chief Operating Officer
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Title: Senior Vice President
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BANK OF AMERICA, N.A., as Master Servicer or Servicer
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/s/ John S. Cousins
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|
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Name: John S. Cousins
|
|
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Title: Senior Vice President
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MGIC’s
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JUNE
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Default Servicing Guide
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2013
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Introduction
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page 1
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Communication Shortcuts
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3
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1 Reporting
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1.01 Reporting Requirements
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5
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1.02 Reporting Defaults
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6
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1.03 Updating Default Status
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6
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2 Loss Mitigation Workouts
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2.01 Foreclosure Sale Postponement
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9
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2.02 Forbearance
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10
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2.03 Repayment
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11
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2.04 Special US Treasury, GSE Programs
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12
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2.05 Loan Modification
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12
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2.06 Short Sale and Deed in Lieu of Foreclosure
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14
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3 Foreclosure
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3.01 Foreclosure Commencement
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17
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3.02 State Time Frame Guidelines for Loans with Primary Coverage
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18
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3.03 Bankruptcy
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19
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3.04 Foreclosure Bidding Instructions
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20
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3.05 Deficiency Judgments
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22
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4 Real Estate Owned (REO)
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4.01 REO Property Disposition for Primary Coverage
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23
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4.02 REO Property Disposition for Supplemental Coverage (Pool or Second-Layer Coverage)
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24
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MGIC’s Default Servicing Guide
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Table of Contents
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5 Claim for Loss
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5.01 Conditions Prior to Claim
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27
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5.02 Exclusions from Coverage
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28
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5.03 Nonclaimable Items
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28
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5.04 Claim Documentation Requirements
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29
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5.05 Filing Claims
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31
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5.06 Check Claim Status
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32
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5.07 Explanation of Benefits
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32
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6 Exhibits
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6.01 MGIC Financial Analysis Form
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33
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6.02 Arrearage and Principal Reduction Defined With Respect to Loan Modifications
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34
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6.03 State Time Frames for Loans with Primary Coverage
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36
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6.04 Claim for Loss Form
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37
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7 Default Servicing Tools
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7.01 MGIC/Link Servicing
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39
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7.02 Automated Default Reporting
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41
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7.03 Secure File Transfer
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42
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7.04 Electronic Funds Transfer (EFT)
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42
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MGIC Reservation of Rights |
MGIC retains a full and complete reservation of rights. Neither this document nor any action taken by MGIC that may appear inconsistent with this document should be construed as a waiver by MGIC of any rights or defenses it may have.
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MGIC Master Policy |
MGIC’s Master Policy is referred to on several occasions within this guide. To view a copy of the Master Policy, see Master Policyholder resources at www.mgic.com/ lender-services/index.html.
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MGIC Delegated Servicing
Authority
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As a servicer, you are bound by the requirements under MGIC’s Master Policy to mitigate MGIC’s loss and report certain loss mitigation measures to MGIC.
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To facilitate your loss mitigation efforts, MGIC offers Delegated Servicing Authority to help streamline your default servicing processes. You can use this authority to approve or complete — without our prior approval — loss mitigation workouts (Section 2) that meet our Guidelines for Delegated Authority (referred to throughout this guide as “Delegated Guidelines”).
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These guidelines may supersede any special delegation authority previously offered. We reserve the right to revoke any delegation.
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Delegated Guidelines apply to loans with primary coverage and/or supplemental coverage (pool or second-layer coverage).
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Use of the Term “Borrowers” |
Throughout this guide, “borrowers” refers to multiple borrowers or a single borrower.
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References
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Throughout the guide, you will be referred to supporting information in other sections within the document. For example, (2.06) means you will find related information in Section 2, subsection 6. These references are hyperlinked to the appropriate page in the guide.
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The guide also includes external references, linked to pages on our website, www.mgic.com.
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Special Notes |
Information to note will be pointed out to you with this symbol, Note.
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MGIC/Link Servicing |
In cases where you need to report or submit information to MGIC, our secure, online servicing tool, MGIC/Link (7.01), is usually the best option. You can complete most of your default servicing tasks on MGIC/Link, including reporting, requesting approvals and uploading documentation.
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Support
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If you have any questions about information presented in this guide, contact MGIC Customer Service, customer_service@mgic.com or 1-800-424-6442.
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■
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Login ID and password registration for MGIC/Link Servicing and Secure File Transfer at www.mgic.com/signup
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■
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Questions? Contact customer_service@mgic.com or 1-800-424-6442
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Communication | Submission Options |
Time Frame
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Default Reporting | ||
Notice of Default
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■ Automated Default Reporting
■ MGIC/Link Servicing – Select File/Update a Default
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Upon 2nd consecutive past- due payment, by the 20th day of the month
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Default Status Updates
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■ Automated Default Reporting
■ MGIC/Link Servicing – Select File/Update a Default
■ Secure File Transfer – Select MEA Updates
■ Fax to 1-800-353-8781
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Monthly updates by the 20th day of the month
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Loss Mitigation/Loan Workouts
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||
Loan Modification Reporting
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■ MGIC/Link Servicing – Select Loan Modification
– Individual modifications – Submit single loan mod
– Multiple modifications – Submit Loan Mod Submission
Spreadsheet
■ Secure File Transfer – Select Loan Modifications
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Within 30 days of completed modification effective date
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Nondelegated
Short Sale Approval
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■ MGIC/Link Servicing – Select Short Sale
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Prior to agreement of terms
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Other Nondelegated Loan
Workout Approval
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■ MGIC/Link Servicing – Select Other Workout Types
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Prior to agreement of terms
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Processing Promissory
Notes Payable to MGIC
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■ Send to: Resurgent Mortgage Servicing
55 Beattie Place, Ste. 110, MS #003
Greenville, SC 29601
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Upon execution, following short sale/deed in lieu execution
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Real Estate Owned (REO)
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||
Request for Approval of
Offer
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■ Send documents to reo_marketing@mgic.com
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Upon MGIC receipt of the
offer, through the time of claim resolution
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Claim Filing
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||
Initial Claim Filing
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■ MGIC/Link Servicing – Select File a Claim
– Submit required documentation, DSG 5.04
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Within 60 days of title transfer/
foreclosure completion
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Submission of Claim
Documents
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■ MGIC/Link Servicing – Select Upload Claim Documents
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Submit documents before, during or after claim filing or upon request
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Submitting Additional Expenses on a Paid Claim (Supplemental)
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■ MGIC/Link Servicing – Select File a Claim; then
Supplemental Confirmation Required
■ Send documents to claimsquery@mgic.com
– Identify as “additional expenses” and list MGIC C/C
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Within 90 days of initial claim payment
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Request for Reconsideration of a Paid Claim
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■ Send documents to claimsquery@mgic.com
– Identify as a “request to reconsider” and list MGIC C/C
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Within 90 days of initial claim payment
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Claim Status/ Explanation of Benefits
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■ MGIC/Link Servicing – Select Policy Inquiries
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Section 1: Reporting
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1.01 Reporting Requirements
1.02 Reporting Defaults
1.03 Updating Default Status
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Below is a summary of MGIC reporting requirements. Refer to the sections indicated for guidelines, reporting/submission options, documentation requirements and support.
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1.01a Defaults |
Notify MGIC when a borrower becomes 2 consecutive payments past due by filing a Notice of Delinquency (1.02).
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1.01b Default Status |
On a monthly basis, report to MGIC both the status of loans in default and your servicing efforts to remedy default as required by the Master Policy.
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1.01c HAMP Modifications |
Report on a monthly basis:
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■ HAMP trial status;
■ all other HAMP modification status updates; AND
■ all completed (official) HAMP modifications.
For details, see www.mgic.com/default-servicing/treasury-gse-programs.html.
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1.01d Loan Modifications |
Report completed modifications that meet MGIC Delegated Guidelines to MGIC within 30 days of the modification effective date (2.05a).
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–
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For modifications that fall outside of MGIC Delegated Guidelines (2.05b), submit requests to MGIC for approval before completing the modification as required by the Master Policy.
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1.02a |
Guidelines for
Reporting Defaults
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Notify MGIC when a borrower becomes 2 consecutive payments past due by filing a Notice of Delinquency.
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Reporting
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File a Notice of Delinquency via:
■ MGIC/Link Servicing – Select File/Update a Default in the main menu; OR
|
■ |
Automated Default Reporting (ADR) – Produce your ADR file no earlier than the 20th day and report to MGIC by the 3rd-to-last business day of the month.
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Note | Contact MGIC Customer Service with any Mortgage Insurance Premium questions when a loan becomes delinquent. |
Support
|
For questions regarding ADR setup, contact MGIC eCommerce Services, ecommerce_services@mgic.com or 1-800-558-9900.
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1.03a |
Guidelines for Updating
Status via Automated
Default Reporting (ADR)
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Update default status in ADR monthly.
When updates aren’t reported, MGIC will send a Monthly Exception Audit (MEA) listing all loans that were previously reported as delinquent, but that are missing from the most recent ADR submission.
MGIC will deliver MEA reports to you through Secure File Transfer (SFT). We will notify you via e-mail that an MEA report has been posted to SFT.
Update the MEA with the most current status of the loans previously reported as delinquent, but that are missing from the most recent ADR submission.
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Reporting
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Report changes in status as they occur:
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1.03b
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Guidelines for Updating Status Using a Method Other Than ADR
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MGIC mails a Monthly Delinquency Loan Status Report (MDLSR) on each loan previously reported in default. MGIC prints the last reported status on the MDLSR to help you determine whether the status has changed.
Use the MDLSR to update or provide additional information about any of the following items:
■ loan status;
■ current principal balance;
■ loan due-for date;
■ delinquency status – if a bankruptcy petition was filed, include chapter, filing date and date relief was granted;
■ date foreclosure proceedings commenced (first legal action/date of the first document filed) and whether there is a foreclosure sale scheduled (3.01a);
■ foreclosure sale date, if applicable; AND/OR
■ date Borrower’s Title or Good and Merchantable Title (as defined in MGIC’s Master Policy) was acquired (5.01b).
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Reporting |
Whenever a change occurs to any of the information listed above, return the updated default status information to MGIC by the 20th of the month via:
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Section 2:
Loss Mitigation
Workouts
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|
2.01 Foreclosure Sale Postponement
2.02 Forbearance
2.03 Repayment
2.04 Special US Treasury, GSE Programs
2.05 Loan Modification
2.06 Short Sale and Deed in Lieu of Foreclosure
|
MGIC Reservation of Rights |
MGIC retains a full and complete reservation of rights. Neither this document nor any action taken by MGIC that may appear inconsistent with this document should be construed as a waiver by MGIC of any rights or defenses it may have.
|
2.01a
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Delegated Guidelines for Foreclosure Sale Postponement
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You have delegated authority to postpone a scheduled foreclosure sale in order to pursue a forbearance, repayment plan, loan modification or short sale. This delegation pertains only to the postponement of the foreclosure sale.
MGIC’s liability (interest and expenses) may be limited to state time frames (3.02).
|
Note |
Loss mitigation workouts that do not meet MGIC’s delegated guidelines for forbearance (2.02), repayment plans (2.03), loan modifications (2.04, 2.05) or short sales (2.06) must be submitted to MGIC for prior approval.
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2.01b
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Nondelegated Requirements for Foreclosure Sale Postponement
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Submit a foreclosure sale postponement request and documentation as described below.
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Documentation
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Submit the following:
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Submission
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Request approval and submit documentation via MGIC/Link Servicing. Select Other Workout Types in the main menu.
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2.02a
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Delegated Guidelines for Forbearance Plans
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You have delegated authority to complete a forbearance plan on MGIC-insured loans that meet the following criteria:
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2.02b
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Nondelegated
Requirements for Forbearance Plans
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Forbearance plans falling outside of MGIC Delegated Guidelines (2.02a) must be approved before the plan is implemented.
Submit a request and required documentation.
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Documentation
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Submit the following:
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Note
|
While we ask that you make every effort to obtain required documentation, we realize that is not always possible. If despite your efforts you are unable to produce all of the required documents, submit all available documentation for MGIC to review the workout request.
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Submission |
Submit requests for approval and required documentation via MGIC/Link Servicing.
Select Other Workout Types in the main menu.
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2.02c
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Borrower Adherence |
If borrowers do not adhere to the forbearance plan payment schedule:
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2.03a
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Delegated Guidelines for Repayment Plans
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You have delegated authority to complete repayment plans on MGIC-insured loans that meet MGIC Delegated Guidelines. The repayment term may not exceed 6 months from the loan due date.
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2.03b
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Nondelegated
Requirements for Repayment Plans
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Repayment plans falling outside of MGIC Delegated Guidelines (2.03a) must be approved before the plan is implemented.
Submit a request and required documentation as described below.
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Documentation
|
Submit the following documentation and information:
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Note
|
While we ask that you make every effort to obtain required documentation, we realize that is not always possible. If despite your efforts you are unable to produce all of the required documents, submit all available documentation for MGIC to review the workout request.
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Submission |
Submit requests for approval and required documentation via MGIC/Link Servicing.
Select Other Workout Types in the main menu.
|
2.03c
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Borrower Adherence
|
If borrowers do not adhere to a repayment plan schedule:
|
2.05a
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Delegated Guidelines for Loan Modifications
|
■ Interest rate – same or lower than the premodification rate; AND
■ Term – fully amortizing, up to 50 years from loan origination date; AND
■ Loan meets the following capitalization guidelines
|
Policy Type & Modified
Unpaid Principal Balance (UPB)
|
Approval Without Limitations
|
Approval With Limitations to UPB
(pre-mod or original UPB, whichever is less)
|
Primary
■ Less than or equal to 110% of original UPB
|
YES
|
N/A
|
■ Greater than 110% of original
UPB
|
■ Numb
0-12 months AND
■ Payment (P&I) reduced or stays the same
Then, YES
|
■ Number of PITI payments capitalized
> 12 months AND/OR
■ Payment (P&I) increased
Then, YES, with limitations
|
Pool Only or Primary with Pool
■ Less than or equal to 105% of original UPB
|
YES
|
N/A
|
■ Greater than 105% of original
UPB
|
■ Number of PITI payments capitalized
0-6 months AND
■ Payment (P&I) reduced by 25% or more
Then, YES
|
■ Number of PITI payments >6 months
AND/OR
■ Payment (P&I) not reduced by at least
25%
Then, YES, with limitations
|
Note
|
If a modification exceeds the guidelines above, submit to MGIC for review.
|
Reporting | Report completed loan modifications within 30 days of the modification effective date. |
Note | Refer to 6.02 for the application of arrearage and principal reduction with respect to loan modifications. |
2.05b
|
Borrower Adherence
|
If borrowers do not adhere to modification payment terms:
|
Note
|
On Fannie Mae or Freddie Mac loans, follow investor guidelines. MGIC has delegated approval authority to Fannie Mae and Freddie Mac for short sale and deed in lieu workouts (5.04b).
|
2.06a
|
Delegated Guidelines for Short Sales and Deeds In Lieu
|
You have delegated authority from MGIC to complete a borrower-titled short sale or deed in lieu on every MGIC-insured, non-GSE loan where:
|
Delinquency
|
Stated Hardship Reason
|
Credit
Score
|
Current or
<60 days
|
■ Death
■ Long-term/permanent disability
■ Distant employment transfer, including Permanent Change of Station order, greater than 50 miles
|
Not
Applicable
|
>60-120 days
|
■ Death
■ Long-term/permanent disability
■ Distant employment transfer, including Permanent Change of Station order, greater than 50 miles
■ Unemployment outside of borrower control
■ Divorce
|
Not
Applicable
|
>120 days
|
■ Any
|
< 620
|
Note | MGIC allows delegation for short sales and deeds in lieu, regardless of occupancy type. |
2.06b
|
Borrower Contribution Requirements
|
MGIC Delegated (Non-GSE)
|
Note | Resurgent will send the borrower a welcome letter and perform all servicing activities on behalf of MGIC. |
2.06c
|
Closing Provisions
(Short Sales Only)
|
Second lien payoff provisions apply to second mortgages owned by a third party (a legal entity unaffiliated with the servicer).
If a second mortgage exists, and the short sale has influence on MGIC’s claim settlement (i.e., a second mortgage exists and the second lien holder demands funds to release the lien), use the following to determine the allowable payoff:
|
■
|
MGIC will agree to pay a maximum of $6,000 or an amount not to exceed 50% of the current outstanding second lien amount to the second lien holder. This requirement only applies if the net proceeds from the short sale plus MGIC’s claim payment will make the servicer whole.
|
Note |
Third-party vendor loss mitigation fees are not claimable and should not be deducted from the sales proceeds or included as an expense on the claim.
|
2.06d
|
Nondelegated
Requirements for
Short Sales and Deeds in Lieu
|
Short sales and deeds in lieu that fall outside of MGIC Delegated Guidelines (2.06a)require MGIC approval before the sale or deed in lieu is completed.
Submit your request for approval to MGIC along with the following documentation.
|
Documentation
|
MGIC requires the following documents:
|
Submission
|
Submit your request for approval and required documentation using MGIC/Link
Servicing. Select Short Sale or Deed in Lieu, as appropriate in the main menu.
|
Section 3:
Foreclosure
|
|
3.01 Foreclosure Commencement
3.02 State Time Frame Guidelines for Loans with Primary Coverage
3.03 Bankruptcy
3.04 Foreclosure Bidding Instructions
3.05 Deficiency Judgments
|
3.01a
|
Guidelines for
Foreclosure Commencement
|
When a default cannot be resolved through a loan workout, foreclosure must be initiated by filing a complaint in the appropriate court; publishing a notice of sale or by such other process as required by Applicable Law by the end of the 4th month (120th day) of default.
|
Note | In instances where you receive returned keys from homeowners and/or are made aware of a property’s abandonment, immediately begin the foreclosure process. |
3.02a
|
Guidelines for State Time Frames
|
MGIC has state time frames (6.03) that list the number of days MGIC allows to complete a foreclosure, subject to additional time required for diligent servicing and loss mitigation activities. If the number of days submitted on a claim exceeds the applicable State Time Frame, please provide to MGIC a chronology of events (5.04a). MGIC will review the information to determine if additional days claimed will be allowed.
|
Last Paid
Installment
|
Foreclosure Commencement
|
Foreclosure
Completion
|
Claim
Filing
|
5 months (150 days) if last paid installment is 5/1/08 or after
|
Variable days based on State & Foreclosure Method from Foreclosure Commencement to Foreclosure Completion
|
60 days |
Note |
Short sale/deed in lieu: State time frame guidelines also apply to short sale and deed in lieu claims. Claim filing is required within 60 days of the short sale closing or execution of the deed in the case of a deed in lieu.
|
3.03a
|
Guidelines for Borrowers Filing Bankruptcy
|
Initiating relief from bankruptcy under a Chapter 13 filing must be completed within 60 days from the date of the last payment under the bankruptcy plan.
|
Reporting
|
If borrowers are involved in any bankruptcy proceeding, notify MGIC via MGIC/Link Servicing. Provide the following information:
|
3.04a
|
Foreclosure Bid Calculation Reference Table
|
Note
|
If the bid calculation exceeds the total mortgage indebtedness, bid the total debt.
|
Property
State
|
Bidding Instructions
|
AK(1)
|
Greater of 85% FMV or investor guidelines
|
AL
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
AR
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
AZ(1)
|
Greater of 85% FMV or investor guidelines
|
CA(1)
|
Greater of 85% FMV or investor guidelines
|
CO
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
CT(2)
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
DC
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
DE
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
FL
|
Start at $100, up to greater of 85% FMV or Make Whole Amount if required by investor
|
GA(1)
|
Greater of 85% FMV or investor guidelines
|
HI
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
IA(1)
|
Greater of 85% FMV or investor guidelines
|
ID
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
IL
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
IN
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
KS
|
100% of total debt
|
KY
|
Start at 2/3 Sheriff Appraisal up to 85% of FMV or Make Whole Amount if required by investor guidelines
|
LA
|
Start at 2/3 Sheriff Appraisal up to 85% of FMV or Make Whole Amount if required by investor guidelines
|
MA
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
MD
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
ME
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
MI
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
MN(1)
|
Greater of 85% FMV or investor guidelines
|
MO
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
MS
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
MT(1)
|
Greater of 85% FMV or investor guidelines
|
Property
State
|
Bidding Instructions
|
NC
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
ND(1)
|
Greater of 85% FMV or investor guidelines
|
NE(1)
|
Greater of 85% FMV or investor guidelines
|
NH
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
NJ(1)
|
Start at $100, up to greater of 85% FMV or investor guidelines
|
NM
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
NV
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
NY(1)
|
Greater of 85% FMV or investor guidelines
|
OH
|
Start at 2/3 Sheriff Appraisal, up to greater of 85% FMV or Make Whole Amount if required by investor
|
OK
|
Start at 2/3 Sheriff Appraisal, up to greater of 85% FMV or Make Whole Amount if required by investor
|
OR(1)
|
Greater of 85% FMV or investor guidelines
|
PA(1)
|
Start at Sheriff cost, up to greater of 85% FMV or Make Whole Amount if required by investor guidelines
|
RI
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
SC(3)
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
SD(1)
|
100% of total debt
|
TN
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
TX
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
UT
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
VA
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
VT(1)
|
Greater of 85% FMV or investor guidelines
|
WA(1)
|
Greater of 85% FMV or investor guidelines
|
WI(1)
|
Greater of 85% FMV or investor guidelines
|
WV
|
Greater of 85% FMV or Make Whole Amount if required by investor
|
WY(1)
|
Greater of 85% FMV or investor guidelines
|
|
|
Guam(1)
|
Greater of 85% FMV or investor guidelines
|
Puerto Rico(1)
|
Greater of 85% FMV or investor guidelines
|
FOOTNOTES
|
(1) MGIC does not pursue deficiencies in these states.
|
(2) In a strict foreclosure action, MGIC requires that you file a motion within 30 days after the title vests, in order to preserve MGIC’s deficiency rights. Please instruct your attorney accordingly
|
(3) The deficiency should be set forth in the initial pleadings. |
3.04b
|
Bid Calculation Components
|
Fair Market Value (FMV)
MGIC requires servicers to obtain and use one of the following documents to determine the appropriate FMV:
|
3.05a
|
Guidelines for
Deficiency Judgments
|
MGIC will notify you in writing if we determine that you should preserve our subrogated deficiency rights.
MGIC requires you to preserve its right to a deficiency judgment if the deficiency is estimated to exceed $30,000.
MGIC will reimburse additional accrued interest and certain expenses resulting from this extended redemption period or delay if:
|
Section 4:
Real Estate
Owned (REO)
|
|
4.01 REO Property Disposition for Primary Coverage
4.02 REO Property Disposition for Supplemental Coverage
(Pool or Second-Layer Coverage)
|
4.01a
|
Guidelines for Property Disposition for Primary Coverage
|
MGIC encourages servicers to pursue marketing of REO properties prior to claim filing or resolution.
List price approval is not required.
Offers deemed acceptable by the insured must be submitted for approval until the claim is resolved.
|
Documentation
|
MGIC requires the following documentation for offer approval:
|
Note | The MGIC Sale Approval Letter will indicate whether the offer is with or without influence to the claim for loss. If the sale has influence to the claim for loss and there are changes to the terms of the sale, MGIC’s approval is required. |
Submission | Send e-mail to reo_marketing@mgic.com, including your submission request and supporting documents. |
4.02
|
REO Property Disposition for Supplemental Coverage (Pool or Second-Layer Coverage)
|
4.02a
|
Guidelines for REO
Property Disposition
for Supplemental
Coverage (Pool or
Second-Layer
Coverage)
|
MGIC will oversee the insured’s marketing activity for all REO properties with supplemental pool or second-layer coverage.
Listing Approval
Submit marketing packages for listing approval within 30 days of property possession.
Upon receipt, MGIC will review the package. Within 3 business days, you will receive our response, including listing instructions and an approved minimum net sale proceeds figure. The list price approval is valid for 60 days.
|
Documentation
|
Listing Approval
|
Note |
Provide the HUD-1 Settlement Statement as soon as it’s available, regardless of when the supplemental (pool or second-layer coverage) claim is filed.
|
Submission | Send e-mail to reo_marketing@mgic.com, including your submission request and supporting documents. |
Section 5:
Claim for Loss
|
|
5.01 Conditions Prior to Claim
5.02 Exclusions from Coverage
5.03 Nonclaimable Items
5.04 Claim Documentation Requirements
5.05 Filing Claims
5.06 Check Claim Status
5.07 Explanation of Benefits
|
MGIC Reservation of Rights |
MGIC retains a full and complete reservation of rights. Neither this document nor any action taken by MGIC that may appear inconsistent with this document should be construed as a waiver by MGIC of any rights or defenses it may have.
|
5.01a
|
Guidelines for
Compliance
|
In order to be entitled to a claim payment, you must comply with all conditions under the MGIC Master Policy, including but not limited to the following:
■ File the Notice of Default and ongoing monthly reporting in a timely manner (1.02, 1.03).
■ Make a good faith effort to mitigate MGIC’s loss (Section 2).
■ Commence and complete foreclosure as required by MGIC (Section 3).
■ Obtain MGIC’s approval as required on borrower-titled (5.01b) or lender-titled sales of the property (Section 4).
■ File the claim for loss in a timely manner (Section 5).
■ Provide supporting documentation and information as requested by MGIC (5.04).
|
5.01b
|
Guidelines for Title Acquisition
|
Acquisition of title to the property is generally a prerequisite to filing a claim for loss, subject to the following requirements:
Good and Merchantable Title
Good and Merchantable Title is title to the property that is free and clear of all liens, restrictions and encumbrances, including the borrowers’ right of redemption, other than title exceptions permitted by MGIC.
|
Note |
Good and Merchantable Title is required for all loans for which MGIC elects to acquire the property and loans with supplemental coverage (pool or second-layer coverage).
Borrower’s Title
Borrower’s Title is title to the property as was vested in the borrower at the time of conveyance through foreclosure or deed in lieu of foreclosure.
|
Note |
If MGIC does not elect to acquire title to the property in settlement of the claim, only Borrower’s Title is required to file the claim.
|
Note |
When MGIC requests a document to support your claim, and if after multiple and reasonable efforts to locate the specific document, you have determined you will never be able to supply it, provide official notification to MGIC using the Unable to Provide selection within MGIC/Link’s Claim Documents feature.
|
5.04a
|
Minimum Documentation
Requirements for all Claims
|
MGIC requires the following documentation to process your claim:
■ A loan payment history from origination to claim filing with corresponding escrow and suspense balances; however, at a minimum, a loan payment history for:
– The last 12 payments prior to claim filing OR
– If the payment due date has advanced, payment history from the first date of default to claim filing.
■ a comprehensive list, in chronological order, of your efforts and the events pertaining to:
– collection,
– foreclosure,
– loss mitigation,
– bankruptcy AND
– other legal activities;
■ a copy of your collections and loss mitigation systems’ notes;
■ evidence of title transfer (foreclosure deed);
■ if a third-party outbid, a copy of the third-party check;
■ a copy of the complete loan origination package and closing documents; AND
■ any potential additional information (5.04b).
|
Note
|
If the state time frame is exceeded, see 3.02a for details.
|
Submission
|
Submit supporting claim documents using MGIC/Link’s Claim Documents feature.
|
5.04b
|
Potential Additional Documentation
|
MGIC may require additional documentation in order to process your claim, based on the specifics of the loan, certificate or claim type.
Pay-Option ARMs or Loans with Negative Amortization
■ a copy of the Pay-Option ARM Note
Loss Mitigation Efforts
■ terms of any forbearance agreements, repayment plans or modification agreements
■ servicing notes, including a complete chronology of events
Short Sales
■ The additional documentation below applies to both short sales where MGIC has delegated approval authority to Fannie Mae and Freddie Mac and any non-GSE short sales:
– your borrower-titled short sale approval letter;
– a copy of the final HUD-1 Settlement Statement;
– a Broker’s Price Opinion (BPO) or an appraisal no more than 120 days from approval, including interior photographs
■ The additional documentation listed below applies to non-GSE short sales only:
– contribution information, if applicable; AND
– a copy of the executed sales contract.
Deed in Lieu
■ The additional documentation below applies to both deed in lieus where MGIC has delegated approval authority to Fannie Mae and Freddie Mac and any non- GSE deed in lieus:
– your deed in lieu approval letter;
– the Deed transferring title; AND
– contribution information, if applicable.
REO Sales
■ a copy of the final HUD-1 Settlement Statement and redemption statements;
■ a valuation (BPO or appraisal) with any repair addenda; AND
■ the approval letter containing the sale terms.
GSE Supplemental Coverage Claims (pool or second-layer coverage)
■ Primary coverage claim payment amount and date paid
|
Submission
|
Submit supporting claim documents using MGIC/Link’s Claim Documents feature.
|
5.04c
|
Acquisition
Documentation
|
If MGIC elects to acquire title to the property, you are required to provide MGIC or its designee the following documents prior to claim payment:
■ a recordable warranty deed (e.g., Grant Deed for California property, Covenant Deed for Michigan property) containing the normal and customary warranties and covenants in the usual and customary form (Quit Claim Deeds are not an acceptable form of conveyance to MGIC);
■ all appropriate state and county transfer forms (executed, if required);
■ evidence of Good and Merchantable Title;
■ evidence that all property taxes are paid current as of the date of acquisition; AND
■ if the property is subject to a homeowners association/condo assessment, a written statement from the association showing that:
– all dues, assessments, penalties and interest are paid current; AND
– all filed liens have been released or satisfied.
|
Submission
|
Submit supporting claim documents using MGIC/Link’s Claim Documents feature.
|
5.05a
|
Primary Coverage
Claims
|
If Fannie Mae is the investor, file the claim on behalf of Fannie Mae.
If Freddie Mac is the investor, do not file a claim; Freddie Mac will file directly with MGIC.
For all other investors, it’s typical that you file the claim on their behalf.
|
Note
|
Servicing documentation requests are sent to and typically fulfilled by the Servicer regardless of Investor.
|
Time Frame Requirements |
A claim on a loan must be filed within 60 days after title transfer which, could be one of the following:
■ a foreclosure sale has been completed OR
■ the property is sold as a borrower-titled short sale (5.01b)
■ For deeds in lieu of foreclosure, a claim must be filed within 90 days from the date of deed in lieu approval and within 60 days of execution of the deed in lieu.
|
Submission
|
See claim-filing options at www.mgic.com/default-servicing/claims.html.
|
5.05b
|
Supplemental Coverage (Pool or Second-Layer Coverage) Claims
|
If a loan has GSE supplemental coverage (pool or second-layer coverage), the investor will file the claim.
For non-GSE, insured loans with supplemental coverage (pool or second-layer coverage), you are responsible for filing the claim.
|
Time Frame Requirements
|
File within 60 days AFTER closing the sale of the property.
|
Submission
|
See claim-filing options at www.mgic.com/default-servicing/claims.html.
|
5.05c
|
Supplemental/Review Claims
|
You can file a supplemental/review claim for one or a combination of the following reasons:
■ To request additional expenses on a paid claim
■ To request that MGIC to reconsider expenses previously disallowed on a paid claim
|
Note | All requests must include supporting documentation that has not already been provided. |
Time Frame Requirements |
File within 90 days of the initial claim payment. MGIC will not consider requests and supporting documentation submitted after 90 days from the initial claim payment.
|
Submission
|
When requesting additional expenses on a paid claim:
■ Submit additional expense information using the supplemental/review claim form on MGIC/Link Servicing.
■ Send all supporting documentation to claimsquery@mgic.com or via Secure File Transfer; select Claimsquery as File Recipient.
When requesting review and payment of previously disallowed items:
■ Send all supporting documentation via Secure File Transfer. Select Claimsquery as File Recipient.
|
Section 6:
Exhibits
|
|
6.01 MGIC Financial Analysis Form
6.02 Arrearage and Principal Reduction Defined With Respect to Loan Modifications
6.03 State Time Frames for Loans with Primary Coverage
6.04 Claim for Loss Form
|
6.02
|
Arrearage and Principal Reduction Defined, With Respect to Loan Modifications
|
6.02a Arrearage |
When a loan is delinquent, a modification typically will address the arrearage (delinquent PITI payments, including claimable interest and expenses). MGIC defines the options in the following ways:
|
Note |
Although not common, the arrearage may be identified as deferred or a forbearance, but still amortized. This is the same as capitalizing the arrearage.
|
6.02b Principal Reduction |
The modification includes a component to reduce the current unpaid principal balance (UPB). The amount of the principal reduction can be forgiven or handled as a forbearance.
|
6.02c
|
Examples
|
|
Description
|
Claim Impact1
|
Capitalize Arrearage (may be called deferred or forbearance, but it is amortized)
|
UPB = $200,000
Loan is delinquent by $3,000
■ Arrearage = $3,000 fully amortized (capitalized)
■ New UPB = $203,000
The borrowers are responsible for paying on a UPB of $203,000.
|
Claimable amount = $203,000
|
Forbear (defer or balloon) arrearage
|
UPB = $200,000
Loan is delinquent by $3,000
■ Arrearage = $3,000 (forbear, balloon or defer), not amortized
■ New UPB = $200,000
The borrowers are responsible for paying on a UPB of $200,000 with a final payment of $3,000 due upon sale or payoff of the loan, in addition to any remaining amount of the modified UPB.
|
Claimable amount = $203,000
■ Calculate interest on
$200,000
■ No interest calculated on forbearance amount of
$3,000
|
Capitalize arrearage; forbear principal
|
UPB = $200,000
Loan is delinquent by $3,000
■ Arrearage = $3,000 fully amortized (The amount is capitalized, but the Servicer may refer to it as forbearance, ballooned or deferred.)
■ Principal = $100,000 (forbear, balloon or defer), not amortized
■ New UPB = $103,000
The borrowers are responsible for paying on a UPB of $103,000 with a final payment of $100,000 due upon sale or payoff of the loan, in addition to any remaining amount of the modified UPB.
|
Claimable amount = $203,000
■ Calculate interest on
$103,000
■ No interest calculated on
$100,000
|
Forbear (defer or balloon) arrearage; forbear principal
|
UPB = $200,000
Loan is delinquent by $3,000
■ Arrearage = $3,000 (forbear, balloon or defer), not amortized
■ Principal = $100,000 (forbear, balloon or defer), not amortized
■ New UPB = $100,000
The borrowers are responsible for paying on a UPB of $100,000 with a final payment of $103,000 due upon sale or payoff of the loan, in addition to any remaining amount of the modified UPB.
|
Claimable amount = $203,000
■ Calculate interest on
$100,000
■ No interest calculated on
$103,000
|
Forgive (reduce)
principal 2
|
UPB = $200,000
Loan is delinquent by $3,000
■ Arrearage = $3,000 capitalized, fully amortized
■ Principal = $50,000 forgiven, not amortized
■ New UPB = $153,000
The borrowers are responsible for paying on a UPB of $153,000. The $50,000 in principal may be completely forgiven or may be due upon sale or payoff of the loan based on the terms of the program.
|
Claimable amount = $203,000
■ Calculate interest on
$153,000 calculated with interest
■ No interest calculated on
$50,000
|
State
|
Method of Foreclosure
|
# of Days from
Due Date of 1st Unpaid Installment to Claim Filing*
|
Paid Through
Date Prior to Claim Filing*
|
AL
|
Power of Sale
|
240
|
270
|
AK
|
Trustee Sale
Judicial w/Redemption
|
300
690
|
330
720
|
AZ
|
Trustee Sale
Judicial
|
300
450
|
330
480
|
AR
|
Power of Sale
|
300
|
330
|
CA
|
Trustee Sale
Judicial w/Redemption
|
300
900
|
330
930
|
CO
|
Trustee Sale w/Redemption
|
345
|
375
|
CT
|
Strict Foreclosure
Power of Sale
|
360
420
|
390
450
|
DE
|
Judicial
|
390
|
420
|
DC
|
Trustee Sale
|
240
|
270
|
FL
|
Judicial
|
390
|
420
|
GA
|
Power of Sale
|
240
|
270
|
Guam
|
Non-Judicial
|
360
|
390
|
HI
|
Judicial
|
390
|
420
|
ID
|
Trustee Sale
Judicial w/Redemption
|
360
540
|
390
570
|
IL
|
Judicial w/Redemption
Judicial w/Redemption-Deficiency
Judicial w/Redemption- Abandonment
|
450
480
300
|
480
510
330
|
IN
|
Judicial w/Redemption
|
420
|
450
|
IA
|
Non-Judicial
Judicial w/o Deficiency
Judicial w/o Deficiency (Non-Owner-Occupied)
Judicial w/Deficiency
|
300
480
360
660
|
330
510
390
690
|
KS
|
Judicial w/Redemption
|
450
|
480
|
KY
|
Judicial
|
360
|
390
|
LA
|
Judicial
|
360
|
390
|
ME
|
Judicial w/Redemption
|
510
|
540
|
MD
|
Trustee Sale w/Redemption
|
285
|
315
|
MA
|
Trustee Sale
|
390
|
420
|
MI
|
Power of Sale
– w/Redemption
– Abandonment
– w/1 Year Redemption (properties in excess of 3 acres)
|
450
300
630
|
480
330
660
|
MN
|
Power of Sale/Redemption
Judicial w/Deficiency
|
450
660
|
480
690
|
MS
|
Trustee Sale
|
240
|
270
|
MO
|
Trustee Sale
|
240
|
270
|
State
|
Method of Foreclosure
|
# of Days from
Due Date of 1st Unpaid Installment to Claim Filing*
|
Paid Through
Date Prior to Claim Filing*
|
MT
|
Power of Sale
Judicial w/Redemption
|
300
660
|
330
690
|
NE
|
Trustee Sale
Judicial
|
270
390
|
300
420
|
NV
|
Trustee Sale
Judicial w/Redemption
|
300
660
|
330
690
|
NH
|
Power of Sale
|
240
|
270
|
NJ
|
Judicial w/o Deficiency
Judicial w/Deficiency
|
480
660
|
510
690
|
NM
|
Judicial w/Redemption
|
360
|
390
|
NY
|
Judicial
|
480
|
510
|
NC
|
Trustee Sale
|
240
|
270
|
ND
|
Judicial w/Redemption
|
360
|
390
|
OH
|
Judicial w/Confirmation
|
450
|
480
|
OK
|
Judicial
|
360
|
390
|
OR
|
Trustee Sale
|
330
|
360
|
PA
|
Judicial
|
390
|
420
|
Puerto Rico
|
Judicial
|
540
|
570
|
RI
|
Power of Sale
|
240
|
270
|
SC
|
Judicial w/o Deficiency
Judicial w/Deficiency
|
330
360
|
360
390
|
SD
|
Judicial w/Redemption
|
480
|
510
|
TN
|
Trustee Sale
|
240
|
270
|
TX
|
Power of Sale
Judicial
|
220
360
|
250
390
|
US Virgin Islands
|
Trustee Sale Judicial w/Deficiency
|
510
|
540
|
UT
|
Trustee Sale
Judicial w/Redemption
|
330
510
|
360
540
|
VT
|
Judicial w/Redemption
|
420
|
450
|
VA
|
Trustee Sale
|
240
|
270
|
WA
|
Trustee Sale
Judicial w/Deficiency
|
330
690
|
360
720
|
WV
|
Trustee Sale
|
270
|
300
|
WI
|
Judicial w/o Deficiency
Judicial w/Deficiency
|
450
630
|
480
660
|
WY
|
Power of Sale w/Redemption
|
405
|
435
|
Support
|
Refer to MGIC’s State Time Frame Guidelines (3.02) for additional information.
|
Section 7:
Default
Servicing Tools
|
|
7.01 MGIC/Link Servicing
7.02 Automated Default Reporting
7.03 Secure File Transfer
7.04 Electronic Funds Transfer (EFT)
|
7.01a
|
Report Defaults and
Default Status
|
Select File/Update a Default in the MGIC/Link main menu to:
■ notify us that a borrower is 2 consecutive payments past due by filing a Notice of Delinquency (1.02).
■ report the status of loans in default and your servicing efforts to remedy default as required by the Master Policy.
|
7.01b
|
Submit Loss Mitigation Workouts
|
Request approval and submit documentation for loss mitigation workouts that do not meet MGIC Delegated Guidelines.
■ Select Loan Modification in the MGIC/Link main menu to submit requests for approval for loan modifications that do not meet MGIC Delegated Guidelines (2.05a).
■ Select Short Sale in the MGIC/Link main menu to: – submit the results of the MGIC Financial Analysis for loans that meet MGIC Delegated Guidelines (2.06a);
– request approval and submit documentation for short sales that do not meet MGIC Delegated Guidelines (2.06d);
– provide additional information on short sale requests pending approval; AND
– request an extension approval.
|
7.01c
|
Report HAMP Modifications for GSE
and Non-GSE Loans
|
Submit your completed MICA HAMP Reporting Template.
■ Select HAMP Reporting in the MGIC/Link main menu.
|
7.01d
|
Report Loan
Modifications
|
■ Report individual or multiple loan modifications that meet MGIC Delegated Guidelines (2.05a)..
■ Select Loan Modification in the MGIC/Link main menu to report individual modifications or upload the Loan Modification Submission Spreadsheet.
|
7.01e
|
File a Claim
|
The most secure, expedient means to file an individual claim is via MGIC/Link Servicing.
|
7.01f
|
Uploading
Documentation
|
Upload documentation through MGIC/Link Servicing:
■ prior to filing a claim OR
■ immediately after filing a claim OR
■ upon MGIC’s request for any missing or additional documentation.
■ Select Claim Documents in the MGIC/Link main menu.
|
7.01g
|
Check Claim Status/ Explanation of Benefits
|
Regardless of how you file a claim, you can check claim status securely and easily through MGIC/Link Servicing. Once a claim has been settled, you can download an Explanation of Benefits.
■ In the MGIC/Link main menu, select Policy Inquiries.
■ Provide the certificate number, a borrower Social Security Number or Servicer Number and select Claim as your Inquiry Type.
|
7.01h
|
View EFT Claim Payment Details
|
View payment details online the same day funds are transferred. Select the Reports tab to access:
■ EFT Reconciliation Reports with daily totals of funds transferred;
■ individual claim payments that comprise the total transfer; AND
■ Explanation of Benefits (EOB) statements for each claim.
|
To Sign Up | To get set up with ADR, contact MGIC eCommerce Services, ecommerce_services@mgic.com or 1-800-558-9900. |
To Sign Up | Register for your MGIC Secure File Transfer login ID and password at www.mgic.com/signup. |
Support
|
View or print SFT Step-by-Step instructions.
View our Send and Receive Files through Secure File Transfer training tutorial.
|
1. | I have reviewed this quarterly report on Form 10-Q of MGIC Investment Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 8, 2013
|
|
|
|
/s/ Curt S. Culver
|
|
Curt S. Culver
|
|
Chief Executive Officer
|
|
1. | I have reviewed this quarterly report on Form 10-Q of MGIC Investment Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 8, 2013
|
|
|
|
/s/ J. Michael Lauer
|
|
Michael Lauer
|
|
Chief Financial Officer
|
|
(1) | the Quarterly Report on Form 10-Q of the Company for the three months ended September 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Curt S. Culver
|
|
Curt S. Culver
|
|
Chief Executive Officer
|
|
|
|
/s/ J. Michael Lauer
|
|
J. Michael Lauer
|
|
Chief Financial Officer
|
· | lenders using government mortgage insurance programs, including those of the FHA and the Veterans Administration, |
· | lenders and other investors holding mortgages in portfolio and self-insuring, |
· | investors (including the GSEs) using risk mitigation techniques other than private mortgage insurance, such as credit-linked note transactions executed in the capital markets; using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage; or accepting credit risk without credit enhancement, and |
· | lenders originating mortgages using piggyback structures to avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ratio and a second mortgage with a 10%, 15% or 20% loan-to-value ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather than a first mortgage with a 90%, 95% or 100% loan-to-value ratio that has private mortgage insurance. |
· | the level of private mortgage insurance coverage, subject to the limitations of the GSEs’ charters (which may be changed by federal legislation), when private mortgage insurance is used as the required credit enhancement on low down payment mortgages, |
· | the amount of loan level delivery fees and guaranty fees (which result in higher costs to borrowers) that the GSEs assess on loans that require mortgage insurance, |
· | whether the GSEs influence the mortgage lender’s selection of the mortgage insurer providing coverage and, if so, any transactions that are related to that selection, |
· | the underwriting standards that determine what loans are eligible for purchase by the GSEs, which can affect the quality of the risk insured by the mortgage insurer and the availability of mortgage loans, |
· | the terms on which mortgage insurance coverage can be canceled before reaching the cancellation thresholds established by law, |
· | the programs established by the GSEs intended to avoid or mitigate loss on insured mortgages and the circumstances in which mortgage servicers must implement such programs, |
· | the terms that the GSEs require to be included in mortgage insurance policies for loans that they purchase, |
· | the extent to which the GSEs intervene in mortgage insurers’ rescission practices or rescission settlement practices with lenders. For additional information, see our risk factor titled “Our losses could increase if we do not prevail in proceedings challenging whether our rescissions were proper or we enter into material resolution arrangements,” and |
· | the maximum loan limits of the GSEs in comparison to those of the FHA and other investors. |
· | restrictions on mortgage credit due to more stringent underwriting standards, liquidity issues and risk-retention requirements associated with non-QRM loans affecting lenders, |
· | the level of home mortgage interest rates and the deductibility of mortgage interest for income tax purposes, |
· | the health of the domestic economy as well as conditions in regional and local economies, |
· | housing affordability, |
· | population trends, including the rate of household formation, |
· | the rate of home price appreciation, which in times of heavy refinancing can affect whether refinance loans have loan-to-value ratios that require private mortgage insurance, and |
· | government housing policy encouraging loans to first-time homebuyers. |
· | Genworth Mortgage Insurance Corporation, |
· | United Guaranty Residential Insurance Company, |
· | Radian Guaranty Inc., |
· | CMG Mortgage Insurance Company (whose owners have agreed to sell it to a worldwide insurer and reinsurer), |
· | Essent Guaranty, Inc., and |
· | NMI Holdings, Inc. |
· | the level of current mortgage interest rates compared to the mortgage coupon rates on the insurance in force, which affects the vulnerability of the insurance in force to refinancings, and |
· | mortgage insurance cancellation policies of mortgage investors along with the current value of the homes underlying the mortgages in the insurance in force. |
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