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18 | Th e M Rep o RT cover story Realizing the Depth of the Crisis F or most MI companies, the true severity of the problem didn't set in right away. "We didn't know the magni- tude of losses, which increased each quarter," explained Bob Quint, former CFO of Radian Group in Philadelphia. However, Radian was fortunate in that the company had experi- enced many years of success prior to the downturn, Quint said, and as a result, had accumulated a large stockpile of liquidity and capital. According to S.A. Ibrahim, Radian CEO, some lenders began offering piggy-back second mort- gages to borrowers, and Freddie and Fannie were buying loans that had higher LTV ratios. "We had to compete against these alternatives to MI, and the external environment had a huge effect on us," Ibrahim said. But Radian was unique in that, "We were among the first to be hit in large measure," he explained, "because we were competing against these alternatives to MI and had a mix of business that included securitized riskier loans, and we were more dependent on a smaller number of customers." Other MI companies also suffered from the shock of what was happening. Rohit Gupta, president and CEO of Genworth Mortgage Insurance in Raleigh, North Carolina, said, "There were a large number of mortgage delinquencies and losses, and we had not seen home price declines of this magnitude in a long time." Gupta also said that private mortgage insurers paid out $51 billion in claims to date since the mortgage crisis, with $45 billion going to Fannie and Freddie. Despite the tremendous payouts though, Gupta said there's reason to look on the bright side, "The mortgage insurance industry played the role it was meant to play." As for the part that Genworth played, Gupta said, "We helped more than 129,000 people stay in their homes. Additionally, for those families who did not have the financial means to pay their mort- gages, we assisted nearly 36,000 borrowers with short sales or deeds-in-lieu to avoid foreclosure." Survival Strategies I n dealing with the crisis, MI companies had to decide what strategies to use. "We wanted to make sure we had enough people in the claims department to analyze the situation and also have enough money to pay the claims," explained Patrick Sinks, CEO of MGIC Investment Corporation. "Internally, we were structured to help our customers. Externally, we worked to interact with regulators." He said that in 2006, MGIC had about 100 people in the claims department. At the peak of the crisis, they had about 400 people. "We built it as we went," Sinks said, "and to do this, we took a hard look at our management team, our processes, and our procedures. We had a lot to do, because the phone was ringing, and people wanted their claims paid." At Radian, CEO Ibrahim said one survival strategy was to expand the company's sales force and customer base. In the second half of 2008, "We felt that one of best ways to deal with the downturn was to write as much high-quality business as we could," he said. "We wrote more than anyone else. That has been the biggest factor in helping us change our portfolio from legacy business to new business." Ibrahim said that attitude has a lot to do with adjusting to un- favorable circumstances. "One of the most critical things is to have the ability to not believe what Gansberg leads his sales management team at Arch's corporate office in Walnut Creek, CA.

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