Advertisement

Ticor Offers Bail-Out Plan to EPIC Insurers

Share
Times Staff Writer

Insurers and lenders facing huge potential losses stemming from the financial problems of a Virginia real estate investment firm are to meet in Chicago tonight to study a bail-out plan proposed by Ticor Mortgage Insurance, which stands to lose the most--as much as $166 million.

The plan to be presented by privately held Ticor, Los Angeles-based parent of Ticor Mortgage, aims to cut the group’s losses significantly, President and Chief Executive Winston V. Morrow said Wednesday. It would give insurers up to six years to resolve the problem, offering mortgage holders an alternative to writing off their entire investment, he said.

“It’s something we think can work,” he said.

Will Take Advantage

Ticor Mortgage ceased writing new mortgage insurance policies Wednesday, but the company has not yet announced any layoffs among its 350 employees, Morrow said. “We are studying the situation. A decision will be taken soon,” he said.

Advertisement

The company continues to operate a number of other financial services, such as providing portfolio advice, he said. But he added that Ticor’s competitors will be quick to take advantage of the unprecedented opportunity to increase their share of the mortgage insurance market.

Last week, Ticor split its profitable title insurance operation into a separate subsidiary to protect it from any financial fallout at the mortgage insurance unit. At the same time, the Federal National Mortgage Assn. stopped buying Ticor-insured mortgages.

So far, Ticor Mortgage’s chairman and chief executive, Raymond R. Rodeno, has resigned; his positions was filled immediately by William J. Fitzpatrick, executive vice president, secretary and counsel of the parent company. Fitzpatrick described Rodeno’s action as voluntary, but Morrow said “a handful” of other executives subsequently resigned “under some pressure.” He declined to elaborate.

Units Employ 6,000

Ticor’s subsidiaries employ about 6,000 persons, most of them in its title insurance business, the nation’s largest, Morrow said.

Ticor’s massive potential loss stems from defaults in payments on $1 billion in mortgages and mortgage-backed securities that it insured for Equity Programs Investment Corp. (EPIC), a real estate syndication concern that has filed for protection under federal bankruptcy laws on behalf of its 341 limited partnerships. State regulators have seized control of both EPIC and its parent, Community Savings & Loan Assn. of Bethesda, Md.

Morrow said he does not know if Maryland and Virginia officials will attend the meetings at Chicago’s O’Hare Hilton. Other major insurers, including Chicago-based Republic Mortgage Insurance Co. and Milwaukee-based MGIC, are to review Ticor’s bail-out proposal tonight, and major lenders are scheduled to convene Friday.

Advertisement

Republic, a subsidiary of Old Republic International, estimates its potential loss at $100 million; MGIC, a unit of Northwestern Mutual Life, stands to lose as much as $65 million. A major lender to EPIC is PSFS of Philadelphia, which holds an estimated $215 million in EPIC mortgages and securities.

Under the proposed plan, Morrow said, EPIC’s mortgages, which typically have lives ranging from 10 to 30 years, would be converted into six-year notes bearing a fixed rate of interest lower than what they are supposed to pay, reportedly 9%. Interest would be paid from rents from the properties, with insurers paying any shortfall up to 25% of the mortgage value.

After six years, the principal would be repaid from the sale of the properties. The mortgage insurers at that point would have to make up any shortages. But the plan would spare their having to make payments immediately on the mortgages, which were to have gone into default Tuesday.

Morrow said that “it is my understanding” that default was forestalled by the state’s takeover of the companies and the EPIC bankruptcy filings.

Advertisement