Loss Reserves (Tables)

3 Months Ended

Mar. 31, 2014

Loss Reserves [Abstract]

Reconciliation of beginning and ending loss reserves

The following table provides a reconciliation of beginning and ending loss reserves for the three months ended March 31, 2014 and 2013:

	Three Months Ended
	March 31,
	2014			2013
	(In thousands)
Reserve at beginning of period	$	3,061,401		$	4,056,843
Less reinsurance recoverable		64,085			104,848
Net reserve at beginning of period		2,997,316			3,951,995
Losses incurred:
Losses and LAE incurred in respect of default notices related to:
Current year		155,982			268,793
Prior years (1)		(33,374	)		(2,585	)
Subtotal		122,608			266,208
Losses paid:
Losses and LAE paid in respect of default notices related to:
Current year		314			246
Prior years		342,669			468,933
Reinsurance terminations (2)		-			(3,145	)
Subtotal		342,983			466,034
Net reserve at end of period (3)		2,776,941			3,752,169
Plus reinsurance recoverables		57,618			96,179
Reserve at end of period	$	2,834,559		$	3,848,348

(1) 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.

(2) 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.

(3) At March 31, 2014 and 2013, the estimated reduction in loss reserves related to rescissions approximated $70 million and $0.2 billion, respectively.

Prior year development of the reserves

The prior year development of the reserves in the first three months of 2014 and 2013 is reflected in the table below.

	Three months ended March 31,
	2014			2013
	(In millions)
Prior year loss development (1):
Decrease in estimated claim rate on primary defaults	$	(30	)	$	(15	)
Increase in estimated severity on primary defaults		5			20
Change in estimates related to pool reserves, LAE reserves and reinsurance		(8	)		(8	)
Total prior year loss development	$	(33	)	$	(3	)

(1) A negative number for prior year loss development indicates a redundancy of prior year loss reserves, and a positive number indicates a deficiency of prior year loss reserves.

Rollforward of primary default inventory

A rollforward of our primary default inventory for the three months ended March 31, 2014 and 2013 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and by transfers of servicing between loan servicers.

	Three Months Ended
	March 31,
	2014			2013
Default inventory at beginning of period		103,328			139,845
New Notices		23,346			27,864
Cures		(27,318	)		(31,122	)
Paids (including those charged to a  deductible or captive)		(7,064	)		(9,445	)
Rescissions and denials		(450	)		(532	)
Default inventory at end of period		91,842			126,610

Aging of the primary default inventory

The decrease in the primary default inventory experienced during 2014 and 2013 was generally across all markets and all book years. However, the percentage of loans in the inventory that have been in default for 12 or more consecutive months has increased in the first quarter of 2014, as shown in the table below. Historically as a default ages it becomes more likely to result in a claim. The percentage of loans that have been in default for 12 or more consecutive months and the number of loans in our primary claims received inventory have been affected by our suspended rescissions and the resolution of certain of those rescissions discussed below and in Note 5 – “Litigation and Contingencies.”

Aging of the Primary Default Inventory

	March 31,				December 31,				March 31,
	2014				2013				2013
Consecutive months in default
3 months or less		14,313	16	%		18,941	18	%		17,973	14	%
4 - 11 months		23,305	25	%		24,514	24	%		32,662	26	%
12 months or more		54,224	59	%		59,873	58	%		75,975	60	%
Total primary default inventory		91,842	100	%		103,328	100	%		126,610	100	%
Primary claims received inventory included in ending default inventory (1)		5,990	7	%		6,948	7	%		10,924	9	%

 (1) Our claims received inventory includes suspended rescissions, as we have voluntarily suspended rescissions of coverage related to certain loans that we believed would be included in a potential resolution. As of March 31, 2014, rescissions of coverage on approximately 1,525 loans had been voluntarily suspended.

Number of payments delinquent

The number of months a loan is in the default inventory can differ from the number of payments that the borrower has not made or is considered delinquent. These differences typically result from a borrower making monthly payments that do not result in the loan becoming fully current. The number of payments that a borrower is delinquent is shown in the table below.

Number of Payments Delinquent

	March 31,				December 31,				March 31,
	2014				2013				2013
3 payments or less		23,035	25	%		28,095	27	%		28,376	23	%
4 - 11 payments		22,766	25	%		24,605	24	%		32,253	25	%
12 payments or more		46,041	50	%		50,628	49	%		65,981	52	%
Total primary default inventory		91,842	100	%		103,328	100	%		126,610	100	%