This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mortgage Insurers Staggering

As the markets reel from renewed credit concerns, most of the mortgage insurers and mortgage bond insurers are taking yet another huge tumble.

Mortgage insurers like PMI Group (PMI), MGIC Investment (MTG - Get Report) and Radian Group (RDN - Get Report) are all posting year-to-date declines of over 70%, with share prices in the single digits fast approaching. Mortgage insurance policies are paid out to mortgage lenders when borrowers default on their debt.

Goldman Sachs' Andrew Brill cut his price targets for MGIC, PMI and Radian Friday, adding more pressure to the stocks. PMI and Radian were still in the red at midafternoon, even as the broad market recovers from the morning's swoon.

"With credit fundamentals continuing to erode quickly and no visibility to when and at what level losses stabilize, we continue to believe it is premature to be bullish," writes Brill, adding that he believes losses will continue for mortgage insurers into 2009.

The problem is that mortgage insurers' and bond insurers' business models are tied to all the disintegrating elements that characterize this credit crunch -- homeowners defaulting on loans and ratings agencies, Moody's Investors Service and Standard & Poor's with diminishing credibility for giving their stamp of approval to mortgage-backed securities and derivatives.

For the mortgage insurers themselves, origination is down, and defaults are up. Indeed the residential real estate market is in recession, with home prices off nearly 20% in two years. Earlier this week, the S&P/Case-Shiller home price index showed that home prices in the country's 10 largest cities fell 5% in August, the largest annual decline since the recession of 1991.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
MBI $9.57 0.00%
MTG $9.91 0.00%
RDN $17.15 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs