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East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Southeast Asia), and later with East Asia.
Company A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.
Holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself.
The Honest Company The Honest Company, Inc. is an American consumer goods company, founded by actress Jessica Alba.
Mortgage life insurance Mortgage life insurance is a form of insurance specifically designed to protect a repayment mortgage. If the policyholder were to die while the mortgage life insurance was in force, the policy would pay out a capital sum that will be just sufficient to repay the outstanding mortgage.
PMI Group The PMI Group is a holding company whose primary subsidiary is the PMI Mortgage Insurance Co. (PMI).
Reverse mortgage A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments.
Second mortgage Second mortgages, commonly referred to as junior liens, are loans secured by a property in addition to the primary mortgage. Depending on the time at which the second mortgage is originated, the loan can be structured as either a standalone second mortgage or piggyback second mortgage.
FHA insured loan An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender. FHA mortgage insurance protects lenders against losses.
Mortgage calculator Mortgage calculators are automated tools that enable users to determine the financial implications of changes in one or more variables in a mortgage financing arrangement. Mortgage calculators are used by consumers to determine monthly repayments, and by mortgage providers to determine the financial suitability of a home loan applicant.
Mortgage-backed security A mortgage-backed security (MBS) is a type of asset-backed security (an 'instrument') which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that investors can buy.
Rocket Mortgage Rocket Mortgage, LLC (formerly known as Quicken Loans LLC) is a mortgage loan provider. It is headquartered in the One Campus Martius building in the heart of the financial district of Downtown Detroit, Michigan.
Adjustable-rate mortgage A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. The loan may be offered at the lender's standard variable rate/base rate.
Subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the collapse of a housing bubble, leading to mortgage delinquencies, foreclosures, and the devaluation of housing-related securities.
Title insurance Title insurance is a form of indemnity insurance predominantly found in the United States and Canada which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Unlike some land registration systems in countries outside the United States, US states' recorders of deeds generally do not guarantee indefeasible title to those recorded titles.
Home insurance Home insurance, also commonly called homeowner's insurance (often abbreviated in the US real estate industry as HOI), is a type of property insurance that covers a private residence. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.
Black Knight, Inc. Black Knight, Inc. (NYSE: BKI), is an American corporation that provides integrated technology, services, data and analytics to the mortgage lending, servicing and real estate industries, as well as the capital and secondary markets.
Mortgage broker A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses.\nTraditionally, banks and other lending institutions have sold their own products.
Underwriting Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. An underwriting arrangement may be created in a number of situations including insurance, issues of security in a public offering, and bank lending, among others.
Passeig de Lluís Companys, Barcelona Passeig de Lluís Companys (Catalan pronunciation: [pəˈsɛdʒ də ʎuˈis kumˈpaɲs]) is a promenade in the Ciutat Vella and Eixample districts of Barcelona, Catalonia, Spain, and can be seen as an extension of Passeig de Sant Joan. It was named after President Lluís Companys, who was executed in 1940.
Estadi Olímpic Lluís Companys Estadi Olímpic Lluís Companys (Catalan pronunciation: [əsˈtaði uˈlimpiɡ ʎuˈis kumˈpaɲs], formerly known as the Estadi Olímpic de Montjuïc and Estadio de Montjuic) is a stadium in Barcelona, Catalonia, Spain. Originally built in 1927 for the 1929 International Exposition in the city (and Barcelona's bid for the 1936 Summer Olympics, which were awarded to Berlin), it was renovated in 1989 to be the main stadium for the 1992 Summer Olympics and 1992 Summer Paralympics.
Companys, procés a Catalunya Companys, procés a Catalunya (Spanish: Companys, proceso a Cataluña) is a 1979 Spanish Catalan drama film directed by Josep Maria Forn, based on the last months of the life of the President of Catalonia, Lluís Companys, in which he shows his detention by the Nazis and his subsequent execution by the Spanish Francoists. It competed in the Un Certain Regard section at the 1979 Cannes Film Festival.
Conxita Julià Conxita Julià i Farrés (Catalan pronunciation: [kuɲˈʃitə ʒuliˈa j fəˈres]; 11 June 1920 – 9 January 2019), also known as Conxita de Carrasco, was a Catalan woman noted for her dealings with Lluís Companys, President of Catalonia, in the 1930s, and for her poetry. Julià died in January 2019 at the age of 98.
Amazon (company) Amazon.com, Inc. ( AM-ə-zon) is an American multinational technology company which focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.
El Tarròs El Tarròs (Spanish: Tarrós) is a small village in Tornabous municipality, in the province of Lleida, in Catalonia, Spain. In 2008 it had 100 inhabitants.
Subprime lending In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subprime borrowers were defined as having FICO scores below 600, although this threshold has varied over time.These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.
Public interest litigation in India The chief instrument through which judicial activism has flourished in India is Public Interest Litigation (PIL) or Social Action Litigation (SAL). Public interest litigation (PIL) refers to litigation undertaken to secure public interest and demonstrates the availability of justice to socially-disadvantaged parties and was introduced by Justice P. N. Bhagwati.
Settlement (litigation) In law, a settlement is a resolution between disputing parties about a legal case, reached either before or after court action begins. A collective settlement is a settlement of multiple similar legal cases.
Lawsuit A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today.
International litigation International litigation, sometimes called transnational litigation, is the practice of litigation in connection with disputes among businesses or individuals residing or based in different countries.\nThe main difference between international litigation and domestic litigation is that, in the former, certain issues are more likely to be of significance — such as personal jurisdiction, service of process, evidence from abroad, and enforcement of judgments.
December December is the twelfth and the final month of the year in the Julian and Gregorian calendars. It is also the last of seven months to have a length of 31 days.
December 17 December 17 is the 351st day of the year (352nd in leap years) in the Gregorian calendar; 14 days remain until the end of the year.\n\n\n== Events ==\n\n\n=== Pre-1600 ===\n497 BC – The first Saturnalia festival was celebrated in ancient Rome.
December 1924 German federal election Federal elections were held in Germany on 7 December 1924, the second that year after the Reichstag had been dissolved on 20 October. The Social Democratic Party remained the largest party in the Reichstag, receiving an increased share of the vote and winning 131 of the 493 seats.
December 18 December 11 is the 345th day of the year (346th in leap years) in the Gregorian calendar; 20 days remain until the end of the year.\n\n\n== Events ==\n\n\n=== Pre-1600 ===\n220 – Emperor Xian of Han is forced to abdicate the throne by Cao Cao's son Cao Pi, ending the Han dynasty.
December 26 December 15 is the 349th day of the year (350th in leap years) in the Gregorian calendar; 16 days remain until the end of the year.\n\n\n== Events ==\n\n\n=== Pre-1600 ===\n533 – Vandalic War: Byzantine general Belisarius defeats the Vandals, commanded by King Gelimer, at the Battle of Tricamarum.
December 8 December 3 is the 337th day of the year (338th in leap years) in the Gregorian calendar; 28 days remain until the end of the year.\n\n\n== Events ==\n\n\n=== Pre-1600 ===\n915 – Pope John X crowns Berengar I of Italy as Holy Roman Emperor (probable date).
J.G. Wentworth The J.G. Wentworth Company is an American financial services company that purchases structured settlements, annuities, and lottery payments in exchange for a lump-sum cash settlement. They also offer debt counseling and negotiation services.The company is known for its television advertisements featuring "Mr.
Vexatious litigation Vexatious litigation is legal action which is brought solely to harass or subdue an adversary. It may take the form of a primary frivolous lawsuit or may be the repetitive, burdensome, and unwarranted filing of meritless motions in a matter which is otherwise a meritorious cause of action.
Risk Factors
MGIC INVESTMENT CORP Item 1A Risk Factors
Forward-Looking Statements and Risk Factors The Company’s revenues and losses could be affected by the risk factors discussed below that are applicable to the Company, and the Company’s income from joint ventures could be affected by the risk factors discussed below that are applicable to C-BASS and Sherman
These risk factors are an integral part of Management’s Discussion and Analysis
These factors may also cause actual results to differ materially from the results contemplated by forward looking statements that the Company may make
Forward looking statements consist of statements which relate to matters other than historical fact
Among others, statements that include words such as the Company “believes”, “anticipates” or “expects”, or words of similar import, are forward looking statements
The Company is not undertaking any obligation to update any forward looking statements it may make even though these statements may be affected by events or circumstances occurring after the forward looking statements were made
The amount of insurance the Company writes could be adversely affected if lenders and investors select alternatives to private mortgage insurance
These alternatives to private mortgage insurance include: • lenders originating mortgages using piggyback structures to avoid private mortgage insurance, such as a first mortgage with an 80prca loan-to-value ratio and a second mortgage with a 10prca, 15prca or 20prca loan-to-value ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather than a first mortgage with a 90prca, 95prca or 100prca loan-to-value ratio, • investors holding mortgages in portfolio and self-insuring, 22 _________________________________________________________________ [58]Table of Contents investors using credit enhancements other than private mortgage insurance or using other credit enhancements in conjunction with reduced levels of private mortgage insurance coverage, and • lenders using government mortgage insurance programs, including those of the Federal Housing Administration and the Veterans Administration
While no data is publicly available, the Company believes that piggyback loans are a significant percentage of mortgage originations in which borrowers make down payments of less than 20prca and that their use is primarily by borrowers with higher credit scores
During the fourth quarter of 2004, the Company introduced on a national basis a program designed to recapture business lost to these mortgage insurance avoidance products
This program accounted for 5dtta7prca of flow new insurance written in the fourth quarter of 2005 and 6dtta5prca of flow new insurance written for all of 2005
Deterioration in the domestic economy or changes in the mix of business may result in more homeowners defaulting and the Company’s losses increasing
Losses result from events that reduce a borrower’s ability to continue to make mortgage payments, such as unemployment, and whether the home of a borrower who defaults on his mortgage can be sold for an amount that will cover unpaid principal and interest and the expenses of the sale
Favorable economic conditions generally reduce the likelihood that borrowers will lack sufficient income to pay their mortgages and also favorably affect the value of homes, thereby reducing and in some cases even eliminating a loss from a mortgage default
A deterioration in economic conditions generally increases the likelihood that borrowers will not have sufficient income to pay their mortgages and can also adversely affect housing values
Approximately 8dtta5prca of the Company’s primary risk in force is located in areas within Alabama (0dtta3prca), Florida (4dtta5prca), Louisiana (1dtta0prca), Mississippi (0dtta6prca) and Texas (2dtta2prca) that have been declared eligible for individual and public assistance by the Federal Emergency Management Agency as a result of Hurricanes Katrina, Rita and Wilma
The effect on the Company from these hurricanes, however, will not be limited to these areas to the extent that the borrowers in areas that have not experienced wind or water damage are adversely affected due to deteriorating economic conditions attributable to these hurricanes
The mix of business the Company writes also affects the likelihood of losses occurring
In recent years, the percentage of the Company’s volume written on a flow basis that includes segments the Company views as having a higher probability of claim has continued to increase
These segments include loans with loan-to-value (“LTV”) ratios over 95prca (including loans with 100prca LTV ratios), “FICO” credit scores below 620, limited underwriting, including limited borrower documentation, or total debt-to-income ratios of 38prca or higher, as well as loans having combinations of higher risk factors
Approximately 9prca of the Company’s primary risk in force written through the flow channel, and 72prca of the Company’s primary risk in force written through the bulk channel, consists of adjustable rate mortgages (“ARMs”)
The Company believes that during a prolonged period of rising interest rates, claims on ARMs would be substantially higher than for fixed rate loans, although the performance of ARMs has not been tested in such an environment
In addition, the Company believes the volume of “interest-only” loans (which may also be ARMs) and other loans with negative amortization features, such as pay option ARMs, increased in 2004 and 2005
Because interest-only loans and pay option ARMs are a relatively recent development, the Company has no data on their historical performance
The Company believes claim rates on certain of these loans will be substantially higher than on comparable loans that do not have negative amortization
23 _________________________________________________________________ [59]Table of Contents Competition or changes in the Company’s relationships with its customers could reduce the Company’s revenues or increase its losses
Competition for private mortgage insurance premiums occurs not only among private mortgage insurers but also with mortgage lenders through captive mortgage reinsurance transactions
In these transactions, a lender’s affiliate reinsures a portion of the insurance written by a private mortgage insurer on mortgages originated or serviced by the lender
As discussed under “The mortgage insurance industry is subject to risk from private litigation and regulatory proceedings” below, the Company provided information to the New York Insurance Department and the Minnesota Department of Commerce about captive mortgage reinsurance arrangements
It has been publicly reported that certain other insurance departments may review or investigate such arrangements
The level of competition within the private mortgage insurance industry has also increased as many large mortgage lenders have reduced the number of private mortgage insurers with whom they do business
At the same time, consolidation among mortgage lenders has increased the share of the mortgage lending market held by large lenders
The Company’s private mortgage insurance competitors include: • PMI Mortgage Insurance Company, • Genworth Mortgage Insurance Corporation, • United Guaranty Residential Insurance Company, • Radian Guaranty Inc, • Republic Mortgage Insurance Company, • Triad Guaranty Insurance Corporation, and • CMG Mortgage Insurance Company
If interest rates decline, house prices appreciate or mortgage insurance cancellation requirements change, the length of time that the Company’s policies remain in force could decline and result in declines in the Company’s revenue
In each year, most of the Company’s premiums are from insurance that has been written in prior years
As a result, the length of time insurance remains in force (which is also generally referred to as persistency) is an important determinant of revenues
The factors affecting the length of time the Company’s insurance remains in force include: • the level of current mortgage interest rates compared to the mortgage coupon rates on the insurance in force, which affects the vulnerability of the insurance in force to refinancings, and • mortgage insurance cancellation policies of mortgage investors along with the rate of home price appreciation experienced by the homes underlying the mortgages in the insurance in force
During the 1990s, the Company’s year-end persistency ranged from a high of 87dtta4prca at December 31, 24 _________________________________________________________________ [60]Table of Contents 1990 to a low of 68dtta1prca at December 31, 1998
At December 31, 2005 persistency was at 61dtta3prca, compared to the record low of 44dtta9prca at September 30, 2003
Over the past several years, refinancing has become easier to accomplish and less costly for many consumers
Hence, even in an interest rate environment favorable to persistency improvement, the Company does not expect persistency will approach its December 31, 1990 level
If the volume of low down payment home mortgage originations declines, the amount of insurance that the Company writes could decline which would reduce the Company’s revenues
The factors that affect the volume of low-down-payment mortgage originations include: • The level of home mortgage interest rates, • the health of the domestic economy as well as conditions in regional and local economies, • housing affordability, • population trends, including the rate of household formation, • the rate of home price appreciation, which in times of heavy refinancing can affect whether refinance loans have loan-to-value ratios that require private mortgage insurance, and • government housing policy encouraging loans to first-time homebuyers
In general, the majority of the underwriting profit (premium revenue minus losses) that a book of mortgage insurance generates occurs in the early years of the book, with the largest portion of the underwriting profit realized in the first year
Subsequent years of a book generally result in modest underwriting profit or underwriting losses
This pattern of results occurs because relatively few of the claims that a book will ultimately experience occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as persistency decreases due to loan prepayments, and higher losses
If all other things were equal, a decline in new insurance written in a year that followed a number of years of higher volume could result in a lower contribution to the mortgage insurer’s overall results
This effect may occur because the older books will be experiencing declines in revenue and increases in losses with a lower amount of underwriting profit on the new book available to offset these results
Whether such a lower contribution would in fact occur depends in part on the extent of the volume decline
Even with a substantial decline in volume, there may be offsetting factors that could increase the contribution in the current year
These offsetting factors include higher persistency and a mix of business with higher average premiums, which could have the effect of increasing revenues, and improvements in the economy, which could have the effect of reducing losses
In addition, the effect on the insurer’s overall results from such a lower contribution may be offset by decreases in the mortgage insurer’s expenses that are unrelated to claim or default activity, including those related to lower volume
Changes in the business practices of Fannie Mae and Freddie Mac could reduce the Company’s revenues or increase its losses
The business practices of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each of which is a government sponsored entity (“GSE”), affect the entire relationship between them and mortgage insurers and include: 25 _________________________________________________________________ [61]Table of Contents • the level of private mortgage insurance coverage, subject to the limitations of Fannie Mae and Freddie Mac’s charters, when private mortgage insurance is used as the required credit enhancement on low down payment mortgages, • whether Fannie Mae or Freddie Mac influence the mortgage lender’s selection of the mortgage insurer providing coverage and, if so, any transactions that are related to that selection, • whether Fannie Mae or Freddie Mac will give mortgage lenders an incentive, such as a reduced guaranty fee, to select a mortgage insurer that has a “AAA” claims-paying ability, • rating to benefit from the lower capital requirements for Fannie Mae and Freddie Mac when a mortgage is insured by a company with that rating, • the underwriting standards that determine what loans are eligible for purchase by Fannie Mae or Freddie Mac, which thereby affect the quality of the risk insured by the mortgage insurer and the availability of mortgage loans, • the terms on which mortgage insurance coverage can be canceled before reaching the cancellation thresholds established by law, and • the circumstances in which mortgage servicers must perform activities intended to avoid or mitigate loss on insured mortgages that are delinquent
The mortgage insurance industry is subject to the risk of private litigation and regulatory proceedings
Consumers are bringing a growing number of lawsuits against home mortgage lenders and settlement service providers
In recent years, seven mortgage insurers, including MGIC, have been involved in litigation alleging violations of the anti-referral fee provisions of the Real Estate Settlement Procedures Act, which is commonly known as RESPA, and the notice provisions of the Fair Credit Reporting Act, which is commonly known as FCRA MGIC’s settlement of class action litigation against it under RESPA became final in October 2003
MGIC settled the named plaintiffs’ claims in litigation against it under FCRA in late December 2004 following denial of class certification in June 2004
There can be no assurance that MGIC will not be subject to future litigation under RESPA or FCRA or that the outcome of any such litigation would not have a material adverse effect on the Company
In August 2005, the United States Court of Appeals for the Ninth Circuit decided a case under FCRA to which the Company was not a party that may make it more likely that the Company will be subject to future litigation regarding when notices to borrowers are required by FCRA In June 2005, in response to a letter from the New York Insurance Department (“NYID”), the Company provided information regarding captive mortgage reinsurance arrangements and other types of arrangements in which lenders receive compensation
In February 2006, in response to an administrative subpoena from the Minnesota Department of Commerce (the “MDC”), which regulates insurance, the Company provided the MDC with information about captive mortgage reinsurance and certain other matters
In the spring of 2005, spokesmen for insurance commissioners in Colorado and North Carolina were publicly reported as saying that those commissioners are considering investigating or reviewing captive mortgage reinsurance arrangements
Insurance departments or other officials in other states may also conduct such investigations or reviews
The anti-referral fee provisions of RESPA provide that the Department of Housing and Urban Development (“HUD”) as well as the insurance commissioner or attorney general of any state may bring an action to enjoin violations of these provisions of RESPA The insurance law provisions of many states 26 _________________________________________________________________ [62]Table of Contents prohibit paying for the referral of insurance business and provide various mechanisms to enforce this prohibition
While the Company believes its captive reinsurance arrangements are in conformity with applicable laws and regulations, it is not possible to predict the outcome of any such reviews or investigations nor is it possible to predict their effect on the Company or the mortgage insurance industry
Net premiums written could be adversely affected if the Department of Housing and Urban Development reproposes and adopts a regulation under the Real Estate Settlement Procedures Act that is equivalent to a proposed regulation that was withdrawn in 2004
HUD regulations under RESPA prohibit paying lenders for the referral of settlement services, including mortgage insurance, and prohibit lenders from receiving such payments
In July 2002, HUD proposed a regulation that would exclude from these anti-referral fee provisions settlement services included in a package of settlement services offered to a borrower at a guaranteed price
HUD withdrew this proposed regulation in March 2004
Although certain state insurance regulations prohibit an insurer’s payment of referral fees, had this regulation been adopted in this form, the Company’s revenues could have been adversely affected to the extent that lenders offered such packages and received value from the Company in excess of what they could have received were the anti-referral fee provisions of RESPA to apply and if such state regulations were not applied to prohibit such payments
The Company’s income from joint ventures could be adversely affected by credit losses, insufficient liquidity or competition affecting those businesses
C-BASS: Credit-Based Asset Servicing and Securitization LLC (“C-BASS”) is particularly exposed to credit risk and funding risk
In addition, C-BASS’s results are sensitive to its ability to purchase mortgage loans and securities on terms that it projects will meet its return targets
With respect to credit risk, a higher proportion of non-conforming mortgage originations (the types of mortgages C-BASS principally purchases) in 2005 compared to 2004 were products, such as interest only loans to subprime borrowers, that are viewed by C-BASS as having greater credit risk
In addition, credit losses are a function of housing prices, which in certain regions have experienced rates of increase greater than historical norms and greater than growth in median incomes
With respect to liquidity, the substantial majority of C-BASS’s on-balance sheet financing for its mortgage and securities portfolio is short-term and dependent on the value of the collateral that secures this debt
While C-BASS’s policies governing the management of capital at risk are intended to provide sufficient liquidity to cover an instantaneous and substantial decline in value, such policies cannot guaranty that all liquidity required will in fact be available
Although there has been growth in the volume of non-conforming mortgage originations in recent years, volume is expected to decline in 2006
There is an increasing amount of competition to purchase non-conforming mortgages, including from real estate investment trusts and from firms that in the past acted as mortgage securities intermediaries but which are now establishing their own captive origination capacity
Decreasing credit spreads also heighten competition in the purchase of non-conforming mortgages and other securities
Sherman: The results of Sherman Financial Group LLC (“Sherman”) are sensitive to its ability to purchase receivable portfolios on terms that it projects will meet its return targets
While the volume of charged-off consumer receivables and the portion of these receivables that have been sold to third parties such as Sherman has grown in recent years, there is an increasing amount of competition to purchase such portfolios, including from new entrants to the industry, which has resulted in increases in the prices at which portfolios can be purchased