Mortgage Companies Reveal Bad First Quarter Earnings

At least some people think the worst is over.

Mortgage companies have lost billions.

The US economy has lost over $200 billion from the subprime mess which has hurt credit markets around the world.

Shares in mortgage lenders and insurers went up this week.

Here’s the news:

NEW YORK (AP) — Broad damage in the mortgage industry was in full view Monday as a number of companies posted dismal first-quarter earnings, but there were also some hope that the worst of the housing crisis is over.

Investors bid up shares of mortgage lenders and insurers despite billions in losses from a sustained housing downturn in the U.S.

Shares of bond insurer MBIA Inc., and mortgage insurers PMI Group Inc. and Radian Group Inc., all rose Monday, though shares of lender IndyMac Bancorp Inc. tumbled nearly 11 percent after warning of a rough year ahead.

The Pasadena, Calif.-based lender lost $184.2 million, or $2.27 per share, during the first quarter. First-quarter losses included credit costs and losses of $249 million tied to a decline in the value of mortgage-backed bonds.

Mortgage lenders and insurers have been stung since the middle of 2007 by a deep slump in home sales, plunging home prices and a spike in mortgage defaults.

Credit standards have stiffened significantly because of rising defaults, meaning meager volume in the industry compared with the anything-goes housing boom that began around 2001. Mortgage insurers have been paying out more claims to cover a wave of defaults, while bond insurers have been forced to cut the value of debt backed by troubled mortgages.

Bond insurer MBIA Inc. posted a $2.41 billion loss, or $13.03 per share, during the first quarter because of deterioration in the credit markets. MBIA, which in recent months has been stung by the potential for spike in claims on bonds backed by mortgages, was forced to take $3.58 billion in write-downs on the derivative contracts its held during the first quarter.

MBIA said those unrealized losses do not reflect actual or anticipated losses at the company. MBIA, however, must mark the derivatives holdings at current market values.

Much of the loss was tied to provisions to cover future claims as defaults among mortgages has skyrocketed since the middle of 2007, forcing mortgage insurers to reserve more money to make claims payments.

Radian set aside $582.7 million for claims provisions during the first quarter. It set aside only $107 million during the same quarter last year.

PMI Group Inc., another mortgage insurer, said it lost $274 million, or $3.37 per share, during the first quarter.

PMI Group’s loss was tied in part to writing down the value of its stake in Financial Guaranty Insurance Co. to zero, from $103.6 million, and $172.5 million tied to a rise in claims payments and reserves for future losses.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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