Mortgage insurance company MGIC Investment Corp. warned today that it expects insurance payouts to rise to as much as $2 billion in 2008 as delinquent home loans fester.
The Milwaukee-based company said fewer late borrowers are resuming mortgage payments, leading to a higher percentage of delinquent loans that become claims, which are also rising in size.
MGIC had previously estimated that payouts would be as high as $1.5 billion this year.
Last month, the mortgage insurer said it had paid $586 million in claims through the beginning of November, predicting it would pay $875 million for all of 2007, up from $611 million in 2006.
The company also estimates that incurred losses, or insurance payouts and loss reserves, will be $1.3 billion in the fourth quarter of 2007.
In December, the company said it planned to limit coverage to borrowers with poor credit, while charging more for higher-risk loans and cutting back loan-to-value ratios in harder hit areas of the country like California and Florida.
Unfortunately it could be too little, too late for the beleaguered mortgage insurer, who held $211.7 billion of insurance in force at the end of 2007.
That total included 107,120 delinquent mortgage loans, a sharp rise from the 16,000 bad loans it held at the end of the third quarter.
Shares of MGIC plummeted $4.30, or 26.79%, to $11.75 in midday trading on Wall Street, flirting with a 15-year low.
The company is set to announce its fourth quarter earnings on February 13.
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