Insurance Regulators Seize Main PMI Subsidiary

October 24 00:00 2011

New York, October 24 ( – Insurance regulators in Arizona have seized PMI Mortgage Insurance Co., which is the main subsidiary of mortgage insurer PMI Group Inc. They will start paying 50% of claims beginning Monday and the balance of each claim will be postponed, the company said.

PMI is the second mortgage insurer after Triad Guaranty Inc. which is being subjected to restrictions on payments. In the case of Triad, policyholders since 2009 have only got 60% of their claims paid in cash and the balance is still deferred.

An order dated Oct. 20 from an Arizona Superior Court judge that has been posted on the company’s website, notifies that the Arizona Department of Insurance now has “full and exclusive power of management and control of PMI.” The top four executives of the mortgage-insurance unit have been asked to proceed on leave but their status with the unit’s holding company PMI Group Inc. has not been affected.

The takeover of the PMI subsidiary comes two months after the company was ordered to stop selling new coverage. These policies are required by lenders when more than 80% of the value of a home is borrowed by a homeowner and if the homeowners are unable to pay their mortgages, the lenders are reimbursed the amount by the insurer.

PMI has suffered about $3 billion in losses since the fourth quarter of 2007 on policies it sold in the years just before the housing bubble burst.