Ticor May Drop Mortgage Insurance
Ticor said Friday that losses from mortgages and mortgage-backed securities that one of its units insured for a troubled Virginia real estate firm could force the Los Angeles company to quit the mortgage insurance business.
The statement by Winston V. Morrow, president and chief executive of Ticor--parent of Ticor Mortgage Insurance--came one week after Ticor announced that it would accept no new mortgage insurance until it knows the extent of a possible $166-million loss in connection with Equity Programs Investment Corp. Ticor ranks as the nation’s third-largest mortgage insurer.
Morrow made the comment despite an announcement minutes earlier that investors and insurers had reacted “encouragingly” to Ticor’s newly unveiled bail-out plan for EPIC.
EPIC sent shock waves through the home lending market last month when it defaulted on payments of $1.4 billion in mortgages and mortgage-backed securities. The default triggered a run on deposits at EPIC’s parent, Community Savings & Loan Assn. of Bethesda, Md. Last week, Maryland officials put the thrift into state-run conservatorship, and most of EPIC’s limited partnerships filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
“Ticor is effectively out of the business of writing new mortgage insurance,” Morrow said in a telephone interview. “We may never be able to go back, even if this plan succeeds. Even if we did it won’t be for a long time and many things would have to happen.”
Despite the gloomy prediction, Morrow stressed that Ticor’s title insurance operation is healthy, and he said he was optimistic that the bail-out plan for EPIC would be accepted. State regulators and several major investors--including the Federal National Mortgage Assn., known as Fannie Mae--said, however, that they are more likely to forge their own proposals to save EPIC.
Standard & Poor’s said Friday that it soon will knock Ticor’s insurance rating to below investment grade but will not act until the extent of Ticor’s loss and reaction to the bail-out plan is known.
Ticor, which faces a greater loss than any other of EPIC’s insurers, said it “has heard no echo of dissent” to its plan, which it formally presented at meetings with investors and insurers Thursday night and Friday morning in Chicago and discussed informally with Maryland officials Wednesday. It stressed the importance of winning support from the state regulators and from key investors such as Fannie Mae, one of the nation’s largest buyers and sellers of mortgage securities and owner of $102 million in EPIC mortgages.
Fannie Mae Chairman and Chief Executive David Maxwell said his agency has forged a coalition of eight of EPIC’s 25 major lenders to “protect their interests and come up with an alternative proposal.”
In Maryland, officials who criticized Ticor’s plan for “not going far enough” in limiting Community’s exposure to loss said they too are devising a bail-out proposal. The state officials acknowledged that Community’s possible losses from EPIC could reach $141 million, which is $25 million higher than previously disclosed.
Ticor’s plan would cut the interest rate on EPIC mortgages to 9% from an average of 13% and postpone payment on principal for six years. Mortgage insurers would pay portions of the unpaid mortgages each year, and homes would be sold to pay principal and interest.
Ticor said it expects most of the entities affected by EPIC to send written statements within 10 days supporting or rejecting the plan.
