Mortgage insurer PMI Group Inc. has filed for bankruptcy this week. The surprise move comes after Arizona insurance regulators seized control of the company amidst allegations of fraud and malpractice. The insurer sought to overturn the actions of regulators through the court system, but and Arizona judged rejected the company’s claims. The California company, whose mortgage insurance unit is housed in Arizona, is now seeking protection through bankruptcy. The company has listed a scant $225 million in assets, with more than $700 million in debt.
PMI is one of the nation’s largest mortgage insurers serving the private sector. In the wake of the financial crisis of 2008 – when the housing market soured – PMI suffered from deteriorating business. Regulators seized control of the Arizona unit after discovering that the company had plans to use government money to write new mortgage policies throughout the nation. The company claims that the money would have help procure new capital investments, but regulators state that the money was never authorized to be used in such a way.
Those receiving coverage from PMI will still have insurance, for the time being. Regulators will continue to ensure the company runs throughout the court proceedings, after which it will be determined whether to company will still be able to offer mortgage insurance in the country. The court date for the matter is scheduled for January 10, 2012.