Industry News

Mortgage, bond insurers could be facing big losses

Standard & Poor's ups loss projections by 20%

Analysts at Standard & Poor's Ratings Services say mortgage and bond insurers could be facing losses 20 percent greater than the rating agency had calculated less than a month ago. After plugging new assumptions about losses in subprime loans made from 2005 through 2007 into a model that's used to test insurers' ability to sustain losses, Standard & Poor's found the companies remain adequately capitalized. But losses will be greater than expected in a Dec. 19 report, with the increase in projected losses ranging from 2 percent to 36 percent among the companies evaluated. What's changed are the rating agency's expectations of losses on subprime loans. In their report last month, Standard & Poor's analysts assumed losses of 5.75 percent on subprime loans made in 2005, 15.5 percent for those made in 2006, and 17 percent in 2007. Now, due to "growing economic consensus that U.S. home-price declines will be larger than previously forecasted" and that the housing s...