Faulty loan documents prompt MGIC to reject millions in claims - Washington Business Journal:

raisavydyexuwowi.blogspot.com
The rejections provide some reliefto , against multimillion-dollar losses that startes in 2007 as the residential real estat e market skidded. However, the insurer is not engaged in a new strategyg tostem losses, said spokesman Mike Zimmerman. “It’s part of what an insurancr company does, is revieew claims,” Zimmerman said. “It’s somethiny we’ve always done.” The claim rejectiond are hitting the financial firmsx that hold the mortgagesafter foreclosures, including and .
MGIC denied 20 percent of claims in the first quarter of compared with the historical average of 5 percengtor less, MGIC executives MGIC and other mortgage insurersz are reviewing more claims as mortgage delinquencies continue placing pressure on insurers’ profits and theirf capital to cover the MGIC reported a net loss for the quarteer ended March 31 of $184.6 millionj after losing $519 million in 2008 and $1.678 billion in 2007. The companty already has declined topay $163 million in claimsa during the first quarted of 2009, nearly equaling the total of $171 million for all of 2008. The companyh denied $28 million in claims for 2007.
Most of the claimsx rejections are for mortgages issued in 2006and 2007, Zimmerman said. Most of the rejections are for sub-prims or no-documentation mortgages, he said. The increase in rescissions or denial reflects the significant amoung of fraud and misrepresentation in loan documents fromthose years, MGIC executives said. “Wed have found, frankly, a very high level of fraud in many of the MGIC chairman and CEO Curt Culverr told shareholders atthe company’s annual meeting earlier this month.
The companyy has added “a couple dozen” staffersz to its internal team at its downtown Milwaukee headquarteras to handle the increased volume of reviewes and investigations on Zimmerman said. The jump in the amounts of coveragew MGIC is rescinding has surprised some lenders who have not previouslu experienced this level of scrutiny for Bari Gambacorta, a Lawrenceville, attorney who represents lenders, said in an intervieqw that lenders typically cooperate with investigations in hopes their claims will still be paid.
“Rathee than brave the tempest and honortheit policies, they (insurers) have electede to get in front of the wave through this novepl rescission approach,“ Gambacorta wrote on a blog wher e he noted the trend. MGIC is working througbh several years of losses from loans insured for poolszof sub-prime and other low-standard mortgages. In the casea where MGIC determines the claimis legitimate, the companyt pays up to 25 percent of the mortgagd principal and other costs related to the Zimmerman said.