According to PMI, their Chapter 11 bankruptcy filing is in response to the seizure of two of its subsidiaries by their primary regulator in Arizona last month. The subsidiaries include PMI Mortgage Insurance Co. and PMI Insurance Co., who make up a significant share of the private mortgage insurance market in the U.S.
According to PMI, they now wish to “raise additional capital from new investors in order to allow a third subsidiary, PMI Mortgage Assurance Company, to serve as a platform to write new mortgage insurance nationwide”.
The Arizona Department of Insurance said that PMI will be making claim payments “at 50 percent”. Presumably, that means that the unpaid balance of the claim will become part of the bankruptcy creditor claims. It is interesting that none of PMI’s subsidiaries themselves filed bankruptcy, only the parent company. While PMI states that they will continue to operate in the ordinary course of business, as a debtor-in-possession, their operations will be under the scrutiny of a Federal Bankruptcy Court.
Sitting on approximately $735 million in unsecured notes that are now due and payable, it is yet unclear as to how PMI’s move will impact the many lenders around the nation who are presently seeking claims reimbursements. Also in question is how this may impact the many tens of thousands of short sales that PMI has insured. If bankruptcy court approval will now be required for claims authorization, the short sale process nationwide and along the Emerald Coast as well could be dealt yet another unwanted setback. Time will tell.