California insurance regulators said Thursday that they have suspended payment of claims by Ticor's mortgage insurance subsidiary, which has been under state supervision since April, 1986.
Insurance Commissioner Roxani M. Gillespie told The Times that she has determined that the company, TMIC Insurance, no longer has enough assets to cover all of its obligations. Gillespie said she has ordered a fresh actuarial review to determine just how far in the hole TMIC has fallen.
"Our actuary has told us he feels that there is a deficiency but that he doesn't know how much," Gillespie said in an interview. "So we know that our claimants are not going to be able to collect in accordance with the plan that was filed in 1986."
That plan anticipated that all claims would eventually be paid in full as the Ticor unit, which is based in Los Angeles, worked its way toward rehabilitation. But as interest rates have fallen, many healthy mortgage loans have been refinanced, reducing TMIC's premium income, Gillespie said.
"It is correct that we have stopped paying on all of TMIC's claims," the commissioner said. She explained that she suspended all claims to avoid having to allocate partial repayments before knowing the extent of TMIC's deficiency.
'Lot of Conversations'
But Gillespie called reports circulating within the industry that the company faces claims of $400 million this year and up to $300 million next year "pure and sheer conjecture." She added, however, that a "substantial cash infusion" will be necessary if TMIC is to make full payment on all its obligations.
"There are a lot of conversations going on right now," she said, adding that "if there is enough interest out there to do that, we can be optimistic" that the company can be restored and its creditors paid in full.
Ticor's title insurance unit is not affected by TMIC's difficulties, which stem from the 1985 failure of Equity Programs Investment Corp., a Virginia firm better known as EPIC. In August, 1985, EPIC defaulted on $1.4 billion in mortgage loans for about 20,000 properties around the country.
TMIC had the misfortune to be the mortgage insurer on 46% of those properties. The company, then known as Ticor Mortgage Insurance, found itself liable for possible losses of $200 million from the mortgages it had insured for the failed EPIC.
Later that year, Ticor changed its mortgage-insurance subsidiary's name to TMIC to put distance between it and the parent's still-thriving title insurance business.
The state Department of Insurance put TMIC under conservatorship in April, 1986, and has been struggling since to save it from liquidation.