Faulty loan documents prompt MGIC to reject millions in claims - The Business Journal of Milwaukee:

belyaevostapuki.blogspot.com
The rejections provide some reliefto , Milwaukee, againsgt multimillion-dollar losses that started in 2007 as the residentiakl real estate market skidded. the insurer is not engaged in a new strategyy tostem losses, said spokesman Mike Zimmerman. “It’ds part of what an insurance company does, is revies claims,” Zimmerman said. “It’s somethingb we’ve always done.” The claimk rejections are hitting the financial firms that hold the mortgagesdafter foreclosures, including and . MGIC denied 20 percen of claims in the first quarterof 2009, compared with the historical average of 5 percent or less, MGIC executivews said.
MGIC and other mortgage insurers are reviewinhg more claims as mortgage delinquenciescontinuee increasing, placing pressure on insurers’ profits and theif capital to cover the losses. MGIC reported a net loss for the quartee ended March 31of $184.6 millionj after losing $519 million in 2008 and $1.67 billio n in 2007. The company alreadyg has declined topay $163 million in claima during the first quarter of 2009, nearly equaling the totak of $171 million for all of 2008. The companyh denied $28 million in claims for 2007. Most of the claimsa rejections are for mortgages issued in 2006 and Zimmerman said. Most of the rejections are for sub-primse or no-documentation mortgages, he said.
The increasew in rescissions or denials reflectss the significant amount of fraud and misrepresentation in loan documente fromthose years, MGIC executives “We have found, frankly, a very high level of frau d in many of the transactions,” MGIC chairman and CEO Curt Culver told shareholdere at the company’s annual meeting earlier this The company has added “a couple dozen” staffers to its internalp team at its downtown Milwaukee headquartera to handle the increased volumr of reviews and investigations on claims, Zimmerman said.
The jump in the amounts of coverage MGIC is rescinding has surprised some lenderas who have not previouslt experienced this level of scrutinyfor claims. Bari a Lawrenceville, N.J., attorney who represent lenders, said in an interview that lenderd typically cooperatewith insurers’ investigationss in hopes their claims will stillp be paid. “Rather than brave the tempest and honortheir policies, they have elected to get in front of the wave through this novekl rescission approach,“ Gambacorta wrote on a blog wherse he noted the trend. MGIC is working througj several years of losses from loans insuredr for poolsof sub-prime and other low-standard mortgages.
In the casesw where MGIC determines the claiis legitimate, the company pays up to 25 percenty of the mortgage principakl and other costs related to the Zimmerman said.