State Cleared to Liquidate Bankrupt TMIC Insurance
California’s insurance commissioner won approval Wednesday to sell the remaining assets of Los Angeles-based TMIC Insurance--the first liquidation ever of a mortgage insurance company.
Los Angeles Superior Court Judge Miriam Vogel granted the state’s request to liquidate TMIC. The decision concluded a two-year effort by the Department of Insurance to pump new life into the bankrupt company, which is a unit of Los Angeles-based Ticor (whose other operations, including a thriving title insurance business, remain unaffected by TMIC’s liquidation).
Insurance Commissioner Roxani M. Gillespie said she intends to hire Roger Gilbert, president of Great American West, a California property-casualty insurer, to preside over the liquidation beginning in mid-May.
“Because this is basically our first time, we have to do something that is orderly and makes sense so that we have something to follow in the future,” Gillespie said in an interview.
Gilbert’s first task, she said, will be to figure out how to distribute the available assets, which by the state’s reckoning totaled $169 million less than TMIC’s liabilities at the end of 1987. Gillespie said that, subject to court approval, some assets will be used to set up a new company to collect premiums for replacement policies that will be offered to holders of TMIC policies.
The defunct company’s major creditors include scores of thrifts as well as the Federal Home Loan Mortgage Corp., or Freddie Mac, and the Federal National Mortgage Assn., known as Fannie Mae.
TMIC’s troubles stemmed from policies that it issued on mortgages held by investors in a Virginia-based real estate tax shelter known as Equity Programs Investment Corp. In August, 1985, EPIC defaulted on $1.4 billion in mortgage loans for 20,000 homes, mostly in the economically depressed Southwest. TMIC had insured nearly half of those mortgages.
Fannie Mae, a congressionally chartered, shareholder-owned company, is the nation’s largest purchaser of mortgages from lenders and had bought $155 million in EPIC mortgages. Many independent thrifts have drawn up interim self-insurance plans to pay future claims not fully covered by TMIC’s liquidation, according to the National Council of Savings Institutions.
