PMI Group files for Chapter 11 bankruptcy (AP)

WALNUT CREEK, Calif. – Private mortgage insurer PMI Group Inc. is seeking shelter from creditors under the Chapter 11 bankruptcy code after the seizure of two of its subsidiaries by regulators in Arizona.

The company said Wednesday that it filed a petition for relief with the U.S. Bankruptcy Court in Delaware, but will continue operating as usual.

PMI intends to use bankruptcy protection to assess its options in light of the action taken by the Arizona Department of Insurance.

On Oct. 20, insurance regulators in Arizona seized PMI's main subsidiaries in the state, PMI Mortgage Insurance Co. and PMI Insurance Co., because the companies did not have enough money on hand to meet state requirements.

The state obtained an order from an Arizona Superior Court judge to take over the PMI subsidiaries. Shortly after, PMI said it would begin paying claims at just 50 percent.

PMI asked the court to vacate the state's takeover of the subsidiaries, but that motion was rejected Tuesday.

As part of its bankruptcy filing, PMI wants the court to appoint a receiver for the seized subsidiaries. A hearing has been set for Jan. 10.

The seizure of PMI's subsidiaries followed heavy losses at the company since the housing market bubble burst.

Private mortgage insurance protects lenders from losses if a homeowner defaults and the lender doesn't recoup costs through foreclosure. The insurance costs the borrower a monthly fee, typically a set percentage of the total mortgage loan.

Like other mortgage insurers, PMI has been able to sell profitable policies in recent years, but the gains from those sales hasn't outpaced losses from policies sold before the housing market collapsed. As flagging home prices have strapped borrowers, the company has had to pay more claims.

PMI said it had been in talks with Arizona's insurance regulators and policyholders over how to stabilize PMI Mortgage in order to maximize the claim payments when the state moved to seize the subsidiaries.

PMI noted it had sought to raise capital from new investors to enable a subsidiary of PMI Mortgage to serve as a platform to write new mortgage insurance nationwide.

Because its subsidiaries were seized, PMI decided pursuing a transaction to raise capital would be impractical now without bankruptcy protection.

Meanwhile, as a result of the bankruptcy filing, PMU's $685 million of senior unsecured notes and about $51.5 million of junior unsecured notes have become due. But PMI said bond holders' ability to enforce their rights under the notes has been halted because of the bankruptcy filing.

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Mortgage group spent $1.12M on 2Q lobbying (AP)

WASHINGTON – The Mortgage Insurance Companies of America spent $1.12 million to lobby the federal government on housing, insurance and other issues in the second quarter of 2011, according to a disclosure report.

That's up about 11 percent from the $1.01 million the trade group spent in the first quarter, and up 2.8 percent from the $1.09 million it spent in the second quarter last year.

The Mortgage Insurance Companies of America is the trade association representing the private mortgage insurance industry. Private mortgage insurance protects a lender against losses when a borrower defaults.

In the April to June quarter, the trade group lobbied Congress on legislation related to the restructuring of government-sponsored enterprises such as Fannie Mae and Freddie Mac, according to the report filed on July 20.

The group also lobbied on measures involving a refinancing program run by the Federal Housing Administration, appropriations for housing and insurance issues involving the Department of Transportation and the Department of Housing and Urban Development; Wall Street reform; and, legislation to make the tax deduction on mortgage insurance premiums permanent.

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Commercial mortgage group spent $120,000 lobbying (AP)

WASHINGTON – The Commercial Real Estate Finance Council, which represents buyers and sellers of investments backed by commercial property loans, spent $120,000 in the second quarter lobbying the federal government.

That's down about 29 percent from the $170,000 the trade group spent in the first quarter, and down 14 percent from the $140,000 it spent in the second quarter last year.

The trade group lobbied on issues related to banking, securities, commercial real estate capital market finance, securitization, credit rating agencies, financial services regulatory reform, terrorism and catastrophe, flood and bond insurance, according to a disclosure report filed July 20.

Besides Congress, the group lobbied the Treasury Department, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Office of the Comptroller of the Currency.

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Mortgage insurer PMI Group warns it may shut down (AP)

NEW YORK – Mortgage insurer The PMI Group Inc. warned investors on Thursday that it may be unable to continue selling new policies and could shut down.

The news sent shares of the Walnut Creek, Calif.-based company plunging to their lowest point in more than two years.

On a day when the broader markets were battered by economic concerns, the stock closed down 47 cents, or 53.4 percent, at 41 cents. Shares were last that low in March 2009, and had changed hands as high as $4.68 in the past 52 weeks.

PMI shares topped $50 a share in 2007, before the housing bubble burst. But the company has posted more than $3.5 billion in losses since 2007 as it paid out claims on foreclosed homes.

That includes a loss of $134.8 million, or 83 cents a share, for the three months ended June 30, which the company reported on Thursday.

Now, the company's main subsidiary, PMI Mortgage Insurance Co., or MIC, doesn't have enough money on hand to meet the requirements of regulations in Arizona, where it is based. The company said the state's insurance department may as a result move to stop it from selling new policies in all states and move to rehabilitate or liquidate the unit.

PMI has known such action was a possibility for some time, and as a backup plan it set up another subsidiary, called PMI Mortgage Assurance Co., that could sell mortgage insurance in certain states.

However, the company warned Thursday that the approval to sell policies on mortgages backed by Fannie Mae and Freddie Mac depends upon MIC continuing operations. PMI said "there can be no assurance" that the two government-sponsored mortgage buyers will allow the PMI Mortgage Assurance to continue selling policies.

Like other mortgage insurers, PMI has been able to sell profitable policies in recent years, but the gains from those sales hasn't outpaced losses from policies sold during the bubble.

Compounding the issue is a sharp rise in the number of previously denied claims that banks appealed and were able to get reinstated by producing better documents to back up them up, CEO L. Stephen Smith said during a conference call on Thursday,

"Our financial results and the trends underlying them present us with serious challenges and a shortened timeline to address them," Smith said.

He said the company is working with a financial adviser to search for ways to raise capital.

"We are concentrating on capital alternatives that, if successful, could provide capital or capital relief to MIC or could provide capital to other subsidiaries so that they may replace MIC as our primary writer of new insurance," the CEO said. "All of the alternatives are complex and require the commitment and cooperation of our key constituents."

The company stopped short of saying it may file for bankruptcy protection, but Chief Financial Officer Donald Lofe said that such a move may be considered

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U.S. mulls making more firms pay corporate tax: group (Reuters)

WASHINGTON (Reuters) – The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said, in an overhaul package that could be unveiled as early as this month.

Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay. Partnerships like law firms and hedge firms would likely be the most affected.

"Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more," said a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman sent on Friday, obtained by Reuters.

Pass-through entities are those in which the income and tax liability "passes through" to the individual rather than being taxed at the company level.

The top corporate tax rate is now the same as the top individual tax rate -- 35 percent. Still, many firms such as private equity and hedge funds have certain income taxed at lower capital gains rates.

Lyman's group represents publicly traded partnerships investing mostly in energy companies. Such partnerships, also called Master Limited Partnerships, pay no tax themselves. Instead the tax is paid by individual owners.

The Obama administration is drawing up a plan to trim the top 35 percent corporate tax rate, among the highest in the world, while cutting deductions, credits and other breaks. Details could emerge as early as this month, according to a source familiar with the proposal.

Corporate America backs a lower rate, but is wary about what breaks it could lose.

White House spokeswoman Amy Brundage said the process is still unfolding.

"No decisions have been made about the content of any specific reform proposal or the timing or manner in which the administration will move this dialogue forward," Brundage said.

Many lawmakers object to reforming corporate taxes alone, because simply cutting the corporate rate excludes many businesses that pay tax through the individual tax code.

Treating more business income in the same fashion is one way to address this concern.

Many businesses would object to a plan that subjects them to the corporate tax.

"We believe that if this proposal is released in its current form, the fact that it sweeps so broadly will ensure widespread opposition from business groups and many in Congress," Lyman said in her email to members.

Treasury Secretary Timothy Geithner has suggested that changes to how types of business are taxed would be considered.

"Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they're treated as corporations for tax purposes or not," Geithner said at a congressional hearing this year.

(Additional reporting by Rachelle Younglai; editing by Mohammad Zargham)

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U.S. mulls making more firms pay corporate tax: group (Reuters)

WASHINGTON (Reuters) – The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said, in an overhaul package that could be unveiled as early as this month.

Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay. Partnerships like law firms and hedge firms would likely be the most affected.

"Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more," said a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman sent on Friday, obtained by Reuters.

Pass-through entities are those in which the income and tax liability "passes through" to the individual rather than being taxed at the company level.

The top corporate tax rate is now the same as the top individual tax rate -- 35 percent. Still, many firms such as private equity and hedge funds have certain income taxed at lower capital gains rates.

Lyman's group represents publicly traded partnerships investing mostly in energy companies. Such partnerships, also called Master Limited Partnerships, pay no tax themselves. Instead the tax is paid by individual owners.

The Obama administration is drawing up a plan to trim the top 35 percent corporate tax rate, among the highest in the world, while cutting deductions, credits and other breaks. Details could emerge as early as this month, according to a source familiar with the proposal.

Corporate America backs a lower rate, but is wary about what breaks it could lose.

White House spokeswoman Amy Brundage said the process is still unfolding.

"No decisions have been made about the content of any specific reform proposal or the timing or manner in which the administration will move this dialogue forward," Brundage said.

Many lawmakers object to reforming corporate taxes alone, because simply cutting the corporate rate excludes many businesses that pay tax through the individual tax code.

Treating more business income in the same fashion is one way to address this concern.

Many businesses would object to a plan that subjects them to the corporate tax.

"We believe that if this proposal is released in its current form, the fact that it sweeps so broadly will ensure widespread opposition from business groups and many in Congress," Lyman said in her email to members.

Treasury Secretary Timothy Geithner has suggested that changes to how types of business are taxed would be considered.

"Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they're treated as corporations for tax purposes or not," Geithner said at a congressional hearing this year.

(Additional reporting by Rachelle Younglai; editing by Mohammad Zargham)

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Citi consumer group gets at least 3 bids: report (Reuters)

PHILADELPHIA (Reuters) – At least three groups of private equity firms have submitted bids for Citigroup Inc's (C.N) consumer finance business, but another round of bidding is expected, according to The Financial Times.

One bidding group consisted of Blackstone Group (BX.N), Carlyle and Brysam Global Partners, the newspaper said in its electronic edition.

A second group consisted of Clayton Dubilier & Rice and Onyx, while a third group included JC Flowers and Apollo Management, the newspaper said.

Citigroup was not immediately available to comment.

(Reporting by Jessica Hall; Editing by Dhara Ranasinghe)

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