MGIC Investment Corp. (MTG)’s Fourth Quarter 2014 Earnings Call Trasncript

Curt S. Culver – Chairman and CEO
I mean there will be no other reason why to hold it up, other than to coordinate the two together and frankly I am applauding them if they indeed were thinking that far ahead.

Timothy J. Mattke – EVP and CFO
Yeah, within the G fee calculation there is credit given for private mortgage insurance. So the impact of PMIERs will impact what they do with G fees. So it makes sense to tie them together.

Q: Okay and given what you think might be a reasonable reduction in the LLPAs if we get it. How much of an impact could that have on the monthly payment and relative value of private MI versus the FHA?

Curt S. Culver – Chairman and CEO
I’d say it’s going to be helpful, but it depends on the degree, I mean, if you eliminate them completely if LLPA go to zero, if any payment disadvantage that was created by the FHA price cuts goes away and it kind of scales up from there and I think it’s probably somewhere around half. But it really depends on pricing dynamics in the marketplace, where spreads are with Jennie Mae’s versus Fannie & Freddie’s, where the lenders are trying to pursue volume maybe taking lower gains on sales et cetera. So there’s a lot of variable that come in.

Again, on the margin we are talking about where if these are 680-720 bucket of borrowers and you are talking about payment differentials of maybe $30, $40 a month, but lifetime increased cost of several thousand dollars a month. But technically from a payment perspective you get half or more till you get a big [inaudible].

Timothy J. Mattke – EVP and CFO
And you can foreclose that all Mark on conventional loan versus the FHA loan, the lender and borrowers are going to choose the conventional loan just for the ease of processing that loan and then working with the system going forward. So I really think when this is all said and done regardless of what happens with FHA the 97% loan is a great opportunity for our industry.

Q: Okay, got it. And then Curt I think you also referenced in your comments the potential that the GSEs might look to go deeper on the cover and do more risk sharing, is that something you get the sense that they are working on right now?

Curt S. Culver – Chairman and CEO
I think those things are being looked at and again it relates back to their mandate from FHFA to offload more risk if you will from tax payers and given the new eligibility requirements, I mean they have a stronger than ever credit counterparties against that. So I certainly think given what they’ve done with their portfolio that they’re looking at that going forward on new writings also.