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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Politics & Money

Mortgage Insurer Losses Narrow

Mortgage insurer Triad Guaranty (TGIC) lost a net $55.2m — or $3.68 per share — in Q109, narrowed from the $122.2m in the previous quarter. The trend might not continue in the face of a growing number of mortgage defaults, however, despite the new limit on payable claims in the insured portfolio–which helps Triad stretch capital further but hurts servicers that now will only receive back a fraction of claims filed. “During the first quarter of 2009, risk in default continued to increase as the combination of the recession and declines in home prices impacted our insured portfolio,” CEO Ken Jones said in a media statement late Friday. Triad’s insurance-in-force slipped 3.4% from year-end to $60.5bn and is down 10.6% from the year-ago level. Net losses of $101.6m erased $50.9m in revenue for the quarter. Losses declined from $178.1m seen in the previous quarter, while revenues gained from $41.4m. “Although we are pleased with the decline in incurred losses during the first quarter,” Jones added, “we continue to operate in historically unprecedented times and the uncertainty regarding the deepening recession, continued declining home prices, and rising unemployment rates, among other considerations, could further adversely impact our future results of operations and financial condition.” Triad paid out $53.9m in losses, down from the $69.4m in claims paid in the fourth quarter. The quarter-over-quarter slow down might not continue for Q209, according to company estimates. “We anticipate that paid losses will grow substantially in future quarters due to the expiration of the public and private foreclosure moratoriums previously in place,” Triad officials said in the statement. Despite any influx in claims filed in the months since the end of Q109, the company may have found some sort of balance, now that it has paid out less on each claim. Triad put itself into run-off and ceased writing new mortgage insurance policies in the middle of last year but on March 3 received a corrective order from its regulator — the Illinois Director of Insurance — limiting its payout on claims to 60 percent. The remaining 40% of a claim will essentially take the form of an IOU, or a deferred payment obligation (DPO), meaning the lender/investor will not immediately be able recover the full amount of its claim. The change in Triad’s payout structure might benefit the company in the short term by allowing it to stretch its capital further on a larger number of claims. It also, however, puts servicers in the position of only receiving a portion of any claim made within an insurance contract, even after paying 100% of the premium. Triad is only the beginning, as HousingWire‘s sources say other regulators will eventually force mortgage insurers across the US to adopt similar policies in the face of tight capital. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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