Fitch Places MGIC Ratings On Negative Watch

NEW YORK (AP) — Credit-ratings agency Fitch Ratings on Thursday placed the ratings of mortgage insurer MGIC Investment Corp. and its operating subsidiaries on a negative watch.

MGIC Investment currently carries a "BBB-" rating, the lowest that is considered investment grade. A downgrade to junk status could further hinder the insurer's ability to generate new business.

Fitch placed the negative watch on MGIC Investment, after it said it would defer interest payments on $390 million in junior subordinated debt. The deferral is further indication of the increasing financial pressure on the company and the mortgage-insurance sector as a whole, Fitch said in a statement.

The mortgage-insurance sector has been pummeled as the housing market has collapsed since the middle of 2007. As the sale of homes and the access to credit has evaporated, new business for insurers has virtually disappeared. Insurers are also facing sharp rises in claims payments as more homeowners default on their mortgages.

Fitch did note MGIC Investment has enough liquidity to meet immediate financing needs.

The ratings agency said it will review MGIC Investment's liquidity and capital plans and the broader mortgage-insurance environment to determine if it will downgrade the company's ratings.

Shares of MGIC Investment tumbled 42 cents, or 33.5 percent, to 82 cents in afternoon trading.