Triad Guaranty May Launch New Mortgage Insurance Company

May 2, 2008 No Comments »

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Triad Guaranty, who a month ago said it may stop writing new insurance because of rising defaults and costly claims, announced today that it may form a new mortgage insurance company with private equity firm Lightyear Capital LLC.

Although still in negotiation, Lightyear and its investor group would likely provide up to $400 million to create the new company, which would employ key members of Triad’s current management and employees, and use some its systems and technologies.

As a result of such an agreement, Triad Guaranty Insurance Corporation would enter into voluntary run-off, with no new insurance written, just earned premiums off existing business.

It’s been a tough year for mortgage insurers, especially Triad, which lost $77.5 million in 2007, compared to net income of $65.6 million a year earlier.

The company was hit by rising defaults, much of them in places where home prices continue to be under pressure, such as California and Florida.

That forced the private mortgage insurance company to tighten underwriting guidelines, addressing loan to value ratio limitations, credit scores and loan documentation requirements.

And just last week, Triad announced that A-Minus and Alt-A loans would no longer be eligible for coverage.

Shares of Triad Guaranty were off five cents, or 2.10%, to $2.33 in afternoon trading, well below their 52-week high of $47.35.

Mortgage insurance protects mortgage lenders from homeowner default.

(photo: tweek)

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