By Jody Shenn and Zachary Tracer
NMI Holdings Inc., which raised $550 million in April to open a mortgage insurer, faces a lawsuit from an Arizona regulator, highlighting the role of state watchdogs as the industry seeks to recover from years of losses.
Arizona officials, acting as receivers for PMI Mortgage Insurance, which they seized last year, sued NMI and at least six of its employees on Aug. 8, saying some PMI workers stole information and did tasks for NMI over at least seven months before joining the upstart. Along with damages, the state wants NMI to be forced to withdraw any applications with insurance agencies and mortgage financiers Fannie Mae and Freddie Mac that relied even partly on material taken from PMI.
State commissioners have stopped PMI, Triad Guaranty Inc. and Old Republic International Corp. from selling new mortgage insurance after claims costs drained funds. Some regulators, along with government-sponsored enterprises Fannie Mae (FNMA) and Freddie Mac, have pressured remaining companies to maintain capital standards. Upstarts such as NMI need the blessing of states and the GSEs as they seek to take market share.