Monday, October 22, 2007

The Magic Fails MGIC

Milwaukee based Mortgage Guaranty Insurance Corporation (MGIC) has the following warm fuzzy feel good blurb posted on their website.

MGIC Investor: Revenue growth, credit quality and productivity. It is these three factors that are the foundation of MGIC's historical performance. The depth and experience of MGIC's leadership helps MGIC management make prudent decisions regarding where and how to compete for mortgage insurance in today's marketplace. Curt Culver and the company's executive management average nearly 20 years of experience each in the private MI industry.

I love the “prudent decisions” phrase because it contrasts so completely with the statements of Chief Executive Curt Culver last week.

MGIC: "The books of business written in 2005, 2006 and most of 2007 will be difficult books financially. These books feature weaker underwriting, and will play out in an environment of deteriorating real estate values. In fact, we modeled an approximate 10% nationwide decline impacting these books. The declines are even more extreme in various MSAs. Frankly, the loss side has hit us much harder and more quickly than we could have ever anticipated. From the loss guidance estimates, we have seen revised from our industry, as well as a number of mortgage originators who are no longer in business, it was not anticipated by many. The ramp-up of loss performance relative to delinquencies, the severity and the cure rate deterioration in California and Florida has been at speeds not seen in previous books of business.”

So thank you for the prudent decisions as MGIC joins the 52 Week Low Club today. “Down to $20.09 from 52-week high of $70.10”. Just another real world example that fiscal irresponsibility is not sustainable. In other Wisconsin news:

Wisconsin State Journal: The 2007-09 budget agreement announced late Friday by Gov. Jim Doyle and legislative leaders would leave a potential shortfall of $889 million in the following two-year budget running from 2009 to 2011, a spokesman for the governor said Monday.

Budget hawk Sen. Mike Ellis, R-Neenah, said he won't support the compromise budget because it leaves the state vulnerable to a downturn in an already shaky economy. "We are continuing credit card budgeting," Ellis said. "We are facing a staggering fiscal crisis that may develop."

SUSTAINABLE. The Democrats love that word when it comes to insisting people change their lifestyles. It is time us general public types start insisting our elective representatives change their lifestyle and start producing work that is financially sustainable. We will not escape the harm coming from this spending way beyond our means.