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

ogarawo.wordpress.com
The rejections provide some reliefto , Milwaukee, against multimillion-dollad losses that started in 2007 as the residential real estatre market skidded. However, the insurer is not engaged in a new strateg tostem losses, said spokesman Mike “It’s part of what an insurance company is review claims,” Zimmerman said. “It’s somethingg we’ve always done.” The claimk rejections are hitting the financial firms that hold the mortgagexsafter foreclosures, including and . MGIC denied 20 percent of claims in the first quarterof 2009, comparedr with the historical average of 5 percent or MGIC executives said.
MGIC and other mortgaged insurers are reviewing more claimz as mortgage delinquenciescontinud increasing, placing pressure on insurers’ profits and their capita to cover the losses. MGIC reported a net loss for the quartert ended March 31of $184.6 millionj after losing $519 million in 2008 and $1.67 billiojn in 2007. The company already has declinedf topay $163 million in claims during the firsg quarter of 2009, nearly equaling the total of $171 milliohn for all of 2008. The company denie d $28 million in claims for 2007. Most of the claimx rejections are for mortgages issued in 2006 and Zimmerman said. Most of the rejections are for sub-prime or no-documentatio mortgages, he said.
The increase in rescissionz or denials reflects the significantt amount of fraud and misrepresentatiob in loan documents from those MGICexecutives said. “We have found, frankly, a very high leve of fraud in many of the MGIC chairman and CEO Curt Culver told shareholders atthe company’s annual meeting earlier this month. The compan has added “a couple dozen” staffers to its interna l team at its downtown Milwaukee headquarterd to handle the increased volumwe of reviews and investigations on Zimmerman said. The jump in the amountw of coverage MGIC is rescindingt has surprised some lenders who have not previouslhy experienced this level of scrutinyfor claims.
Bari a Lawrenceville, N.J., attorney who representds lenders, said in an interview that lenders typically cooperatewith insurers’ investigationw in hopes their claimsa will still be paid. “Rather than bravs the tempest and honor their they (insurers) have elected to get in frontf of the wave througu this novel rescission approach,“ Gambacorta wrot e on a blog where he notedx the trend. MGIC is working through several years of lossed from loans insured for poolsof sub-prime and othefr low-standard mortgages.
In the cases wherr MGIC determines the claim is the company pays up to 25 percenr of the mortgage principal and othee costs related tothe mortgage, Zimmerman