Mortgage Companies Post Losses, Reveal Extent Of Crisis

NEW YORK — Broad damage in the mortgage industry was in full view Monday as a number of companies posted dismal first-quarter earnings, but there were also some hope that the worst of the housing crisis is over.

Investors bid up shares of mortgage lenders and insurers despite billions in losses from a sustained housing downturn in the U.S.

Shares of bond insurer MBIA Inc., and mortgage insurers PMI Group Inc. and Radian Group Inc., all rose Monday, though shares of lender IndyMac Bancorp Inc. tumbled nearly 11 percent after warning of a rough year ahead.

The Pasadena, Calif.-based lender lost $184.2 million, or $2.27 per share, during the first quarter. First-quarter losses included credit costs and losses of $249 million tied to a decline in the value of mortgage-backed bonds.

Mortgage lenders and insurers have been stung since the middle of 2007 by a deep slump in home sales, plunging home prices and a spike in mortgage defaults.

Credit standards have stiffened significantly because of rising defaults, meaning meager volume in the industry compared with the anything-goes housing boom that began around 2001. Mortgage insurers have been paying out more claims to cover a wave of defaults, while bond insurers have been forced to cut the value of debt backed by troubled mortgages.

Bond insurer MBIA Inc. posted a $2.41 billion loss, or $13.03 per share, during the first quarter because of deterioration in the credit markets. MBIA, which in recent months has been stung by the potential for spike in claims on bonds backed by mortgages, was forced to take $3.58 billion in write-downs on the derivative contracts its held during the first quarter.

MBIA said those unrealized losses do not reflect actual or anticipated losses at the company. MBIA, however, must mark the derivatives holdings at current market values.

That and a decline in new business led to the loss.

Yet MBIA shares rose 42 cents, or 4.5 percent, to $9.85.

Shares of Radian Group Inc., a mortgage insurer, also rose Monday despite reported operating losses that totaled $215.2 million, or $2.69 per share, during the first quarter.

Radian shares rose 12 cents, or 2.2 percent, to $5.55.

Much of the loss was tied to provisions to cover future claims as defaults among mortgages has skyrocketed since the middle of 2007, forcing mortgage insurers to reserve more money to make claims payments.

Radian set aside $582.7 million for claims provisions during the first quarter. It set aside only $107 million during the same quarter last year.

PMI Group Inc., another mortgage insurer, said it lost $274 million, or $3.37 per share, during the first quarter.

PMI Group's loss was tied in part to writing down the value of its stake in Financial Guaranty Insurance Co. to zero, from $103.6 million, and $172.5 million tied to a rise in claims payments and reserves for future losses.

Shares of PMI Group rose 18 cents to $6.15.

Shares of IndyMac fell 37 cents, or 10.8 percent, to $3.06.

Comments

[ibsteve2u]

Aren't you glad this "mortgage crisis" happened AFTER the Republicans lost their hold on Congress?

Else, they'd have made it possible for the banks to sieze Social Security payments to pay defaulted mortgages from past years, just like they did with student loans.

lollll...I feel for those parents who have co-signed student loans, since with so much of our economy offshored to increase profits it is far more difficult for their sons and daughters to find jobs that enable them to both repay their loans and "live the American dream".

[CC1]

The American Dream has become a credit nightmare.

[Robert59]

The person reporting this should do some analysis before writing, "there were also some hope that the worst of the housing crisis is over."

The subprime peak hits this month and next meaning foreclosures won't peak until October, November.

Then a year later the Opt As reset. Smaller numbers but bigger in terms of dollars. Those foreclosures will hit late Dec 2009 Jan 2010.

We are 19 to 20 months from seeing the full impact. Anything else is wishful thinking or outright lies.

[ImmanuelGoldstein]

I couldn't agree more. Real estate crashes are generally steeper than the boom that created them but not that much steeper. National housing prices have to fall another 40%+ just to get back to where they were in 1999. We aren't anywhere near there. The bloodletting has a LOOOONG way to go.

These people have been telling us the worst is over every week for the last year, just like the neocons declare victory in Iraq every week. These are the same people who though housing prices could inflate faster than incomes forever.

Based on present evidence I regard my predictions as probably more qualified than theirs because frankly, I'm not trying to sell you a house!

You'd be a damn fool to even CONSIDER buying a house before 2010 unless you absolutely have to, and I'm not sure there's ANYONE who absolutely has to.

[loki]

I wonder if they are really loses, are do these companies want to jump on the Tax payer hand out of billions of dollars to any company who claims to be hurt by the Mortgage problem.

[Veri]

Conspiracy. My kind of wackiness.