A mortgage insurer is ending operations and will lay off 100 employees.
Triad Guaranty Insurance Corp. will stop issuing commitments for mortgage insurance on July 15, parent Triad Guaranty Inc. announced today.
The Winston-Salem, N.C.-based company said it will work with customers, the Illinois Division of Insurance, Fannie Mae and Freddie Mac to assure an orderly transition of its business to run-off.
"We currently expect that our run-off will enable the payment of all legitimate policyholder claims," Triad President and Chief Executive Officer Mark Tonnesen said in the statement.
But in a press release today, Fitch Ratings warned that Triad's margin of safety to meet policyholder obligations could become pressured if delinquency and loss development continue at a sustained pace.
"The 2007 vintage, a significant portion of which was made up of loans with loan-to-value ratios of 95 percent or greater, is currently exhibiting delinquency trends that are materially higher than the troubled 2006 vintage for Triad and the rest of the U.S. mortgage insurers," the ratings agency stated. "Fitch believes higher claim rates will possibly be offset by the probability that many potential claims on mortgage insurance policies may be determined to be ineligible for coverage ... Fitch expects that the levels of rescissions related to these vintages will be significantly higher than historical experience for the mortgage insurance industry in general, particularly within the Alt-A sector, thus reducing the amount of losses."
Triad expects to lay off around 100 employees during the next few weeks as a result of its exit from the business.
Triad had appealed its suspension as an approved mortgage insurer by Freddie last month, but the appeal was denied.
"Triad believes this action by Freddie Mac should not have any immediate adverse impact on Triad's ability to write new mortgage insurance, which Triad is continuing to do with the support of the Illinois Division of Insurance," the company said at the time.
The insurer had also been negotiating with Lightyear Capital LLC to form a new mortgage insurance company, but that deal fell apart.
"We are continuing to work with our financial advisor, Goldman Sachs, to explore whether other strategic alternatives are available, but we are not optimistic that any opportunities will surface," Tonnesen added.