S&P; May Downgrade Ticor; Faces Large Loss
Los Angeles-based Ticor Mortgage Insurance faces a potential loss of more than $100 million as a result of financial difficulties encountered by the real estate arm of a Maryland savings and loan association, Standard & Poor’s said Wednesday.
The New York-based securities rating service said Ticor’s risk had prompted it to place the insurer’s claims-paying rating of AA under consideration for possible downgrading. Ticor said Moody’s Investor Services, another prominent rating service, had done the same.
Ticor said in a statement Wednesday that it does not yet know the size of its possible losses. It has acknowledged its insurance role with Equity Programs Investment Corp., a subsidiary of Community Savings & Loan Assn.
In its statement, Ticor said it has about $150 million to $160 million insurance risk in force on individual mortgage loans originated through Equity and a net amount of about $6 million on loan pools.
Maryland Gov. Harry Hughes this week placed a 20-day ban on withdrawals from Community to give it time to deal with Equity’s problems. Withdrawals have been limited to $1,000 a month since May, when Community’s troubles first surfaced.
S&P; said that, among mortgage insurers, Ticor has the largest exposure to the more than $1 billion of mortgage-backed securities generated by Equity that have reported delinquent payments. Ticor insurance also supports $1.1 billion in various housing bonds.
The mortgage-insurance industry faces a potential loss of as much as $400 million, S&P;’s announcement said, although actual losses will depend upon such factors as the number of actual defaults, the magnitude of losses from reselling properties and expenses incurred in foreclosing on them.
The loss exposure “will create severe stress in Ticor’s capital structure,” S&P; predicted. It also said it has suspended any future ratings of mortgage-backed securities insured by Ticor “pending a resolution” of the Maryland difficulties. S&P; currently rates seven of the mortgage securities issues in Equity’s portfolio, but only two of them are public.
The rating agency also placed on its “credit watch” the BB- rating for the parent Ticor holding company’s $43 million of debentures due in 2008.
Ticor is one of several major firms that insure mortgage-related loans. Among these, Old Republic International revealed Monday that its exposure could cut 1985 net earnings by as much as $55 million if all claims became payable and its reserves required reinforcement.
