Mortgage insurer mayhem

Of all the things catching my attention right now, one thing worth commenting on is the absolute meltdown in the share prices of the leading mortgage insurers. Just look at this long-term chart of PMI Group. It's down 61% year-to-date ... and about $18 in just the past couple of weeks. The stock hasn't traded down here since early 2000.

What's going on? Losses are piling up like cordwood. PMI says it lost $1.05 per share in Q3 thanks to costs that have risen fivefold in a year. Another firm, MGIC Investment, just reported its first quarterly loss since going public 16 years ago. The cost of buying credit default swaps on mortgage insurer debt is also rising, a sign that bondholders are getting more nervous about the possibility of default.

It's not much of a surprise that more lenders are filing mortgage insurance claims. And it's not much of a surprise that mortgage insurers are seeing losses rise. But the magnitude and swiftness of the declines is alarming and noteworthy.