Soros to Goldman poised to win on crisis housing bet

Goldman Sachs Group Inc., JPMorgan Chase & Co. and billionaire George Soros are poised for gains from a housing bet placed in the depths of the financial crisis.

Essent Group Ltd., the Bermuda-based mortgage insurer that raised $500 million from a group including those backers in 2009, filed last week to sell shares in the first initial public offering of a home-loan guarantor in almost two decades.

The industry is rebounding from record homeowner defaults that triggered payouts, forced almost half the companies out of the business and pushed some of the biggest survivors to the brink of default. With property prices now rising at the fastest pace since 2006 and the government reducing its role backing home loans, firms that sold policies before housing collapsed -- Radian Group Inc. and MGIC Investment Corp. -- are attracting new investors to replace capital lost in the slump.

“We still think it’s the best way to play the housing recovery,” Jack Micenko, an analyst at Susquehanna International Group LLP in New York, said of mortgage insurers.

Radian and MGIC, which were unprofitable for most of the past six years, have more than doubled in 2013 in New York trading. Homebuilders in comparison are down 2.5% this year after slumping 22% since a May peak.

Mortgage insurance is typically required when borrowers pay less than 20% of the cost of their home up front. The coverage will play an increasing role in facilitating first-home purchases as the economy strengthens, said Jim Ryan, an analyst at Morningstar Inc.

‘Demand Factors’

“Not many people have the 20% to put down, especially first-time homebuyers,” he said. “There’s a lot of good demand factors there.”

Essent, founded by Mark Casale, a 49-year old, former Radian executive, said in May 2009 it had received a commitment of $500 million from investors including JPMorgan, Goldman Sachs and Pine Brook Road Partners. The backers agreed in 2010 to make another $100 million the following year as housing was entering its fourth year of decline.

While Essent was collecting investments, MGIC recorded losses of more than $1 billion in 2009. That year, Triad Guaranty Inc. was ordered by regulators to only pay a portion of claims after being forced to stop selling policies. Triad and another rival, PMI Group Inc., eventually filed for bankruptcy.

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