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GSEs suspend Republic Mortgage Insurance

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Freddie Mac and Fannie Mae will no longer purchase for securitization most mortgages insured by Republic Mortgage Insurance and its affiliate RMIC of North Carolina. RMIC, a subsidiary of Old Republic International (ORI), a Chicago-based insurance underwriting company with a market capitalization of $2.6 billion, had been showing signs of financial stress since at least last fall. The company breached its regulatory risk-to-capital limits as of Sept. 30, 2010, said Fannie Mae in its statement announcing the company’s suspension as an approved mortgage insurer. While North Carolina regulators had temporarily allowed the company to keep selling insurance, the state’s waivers were due to expire Aug. 31 and there was no sign they would be renewed, said Fannie in explaining its move. Calls to Fannie Mae and Old Republic for comment were not immediately returned. Fitch Ratings shined a spotlight on the insurer’s financial woes earlier this year, putting the company on a negative ratings watch in March and then downgrading it from a triple-B negative rating to double B. The downgrade "is driven primarily by RMIC’s comparatively weak capital levels, continued operating losses and uncertain business prospects," said Fitch in a statement. "At year-end 2010, RMIC’s total capital resources represented just 78% of its delinquent risk-in-force, the lowest ratio among the six active U.S. mortgage insurers." Fitch also cited Old Republic’s failure to inject more capital into its subsidiary as a negative sign for the company’s financial health. "Although RMIC’s delinquencies have started to show positive trends, Fitch expects the company to experience operating losses for the foreseeable future," said analyst Ilya Ivashkov in his report on the downgrade. RMIC was the fifth-largest U.S. mortgage insurer as of year-end, said Fitch, with $18 billion of risk-in-force. Write to Liz Enochs.

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