Ticor Briefs State on Potential Loss : Ailing Real Estate Syndication Firm Causes Concern
Officials of Ticor Mortgage Insurance have briefed California insurance regulators on the potential loss of $150 million to $166 million that it faces through its insurance of mortgage investments packaged by Equity Programs Investment, an Eastern real estate syndication operation, the Department of Insurance said Friday.
The department also is following negotiations in New York to develop a bail-out plan for Equity Programs by Dean Witter Reynolds, financial adviser to its parent, Maryland’s Community Savings & Loan. That plan reportedly would require investors and insurers, including Ticor, to provide a cash infusion of $100 million to $250 million. But a spokesman for Dean Witter declined comment on the news reports of the rescue efforts.
According to California regulators, however, insurers would be loath to advance funds, presumably against anticipated future claims, preferring to pay the claims over a period of years.
“No mortgage insurer would suggest that they be part of the advances,” Norris Clark, chief of the Department of Insurance’s financial analysis division, said in an interview. On the contrary, he said, insurers would be more likely to pay out claims losses over a period of years.
Clark said that he and Insurance Commissioner Bruce A. Bunner were briefed by Ticor officials Thursday.
Ticor has said that it faces a $150-million to $160-million potential loss on individual mortgage loans originated through Equity Programs, plus an additional net amount of $6 million on loan pools.
Standard & Poor’s Corp. and Moody’s Investor Services have placed Ticor’s AA claims-paying rating under scrutiny for possible downgrading, pending resolution of its problems with Equity Programs.
The credit-rating agencies have taken no similar action against the other two major potential losers.
Others Face Losses
(Republic Mortgage Insurance, a subsidiary of Chicago-based Old Republic International, has a $100-million exposure. The nation’s largest writer of the specialized line of insurance, Mortgage Guaranty Insurance Corp., more commonly known as MGIC, an affiliate of Milwaukee-based Northwestern Mutual Life Insurance, faces a potential loss of $75 million. The total potential losses acknowledged by other insurers are less than $10 million each.)
Clark explained that, if a bail-out plan were to require insurers to advance funds, this would further limit the industry’s already reduced capacity to provide mortgage guaranty insurance.
“It will be interesting to see how the negotiations go,” Clark said.
“Everybody will be coming from a slightly different direction,” he said. “Mortgage insurers won’t jump at the chance to put up even half of that $100 million to $250 million.”
California regulators are withholding any judgment, however, until their Maryland counterparts sort out the tangled affairs of Community Savings & Loan and Equity Programs.
Equity Programs revealed last week that it is behind on monthly interest payments on $1.4 billion in mortgages and mortgage-backed securities. That disclosure led to a run on its parent, prompting Maryland Gov. Harry Hughes on Tuesday to impose a 20-day freeze on withdrawals by depositors.
Clark observed that no foreclosures have taken place on the insured investments. (The losses would occur if insurers and underwriters had to foreclose and could not collect the insured value on the 20,000 homes owned by Equity Programs.)
Besides their meeting with Bunner and Clark, Ticor representatives and agents of the other insurers met with Maryland officials in Annapolis on Thursday to discuss efforts to prevent a default, the governor’s office said.
Norm Silverstein, a spokesman for the governor, said the insurers had requested the meeting “to inform the state of their interests and explain some of the steps being taken.
“They are asking for the cooperation of the state in every way possible,” Silverstein said.
