The Mortgage Insurance Companies of America (MICA) reported today that mortgage defaults among borrowers with mortgage insurance jumped 30 percent relative to year-ago levels, with 58,441 primary insurance defaults recorded during August. The reported cure rate -- that is, the number of defaults that were able to reperform -- rose 11 percent in August relative to July, MICA said, registering a still-abysmal 57.9 percent of primary insurance defaults. Here's the press statement; click here to see a performance summary. MICA is the trade organization for most of the nation's large mortgage insurers (save Radian, who is not a member). From Bloomberg, which picked this story up:
"These defaults are a lagging indicator, so they're probably going to get worse from here," said Michael Darda, economist at Greenwich, Connecticut-based equity trading firm MKM Partners LP ... Delinquent policyholders who resumed paying on time rose by 11 percent from July to 33,811, results that "appear encouraging" to Michael Grasher, analyst at Piper Jaffray & Co. in Chicago. "While we expect investors remain guarded on the group, numbers out this morning do not reflect a level of risk commensurate with existing valuations" of some mortgage insurers, Grasher said today in a research note.
Grasher might want to note that cure rates consistently below 60 percent -- at least those calculated by MICA -- haven't been seen...pretty much ever. Insurers have now reported cure rates below 60 percent for three consecutive months, and I can't find another instance of that taking place anywhere else in the available data. He might also want to keep in mind that going back as far as 1990, the mortgage insurance industry has never recorded an annual cure rate below 79 percent. We're currently tracking at 68.4 percent year to date in 2007, according to the MICA data. Just something to keep in mind the next time an analyst decides to suggest that a 57.9 percent cure rate for the month of August appears somehow "encouraging."