PMI Group Inc., the bankrupt parent of a mortgage-insurance company seized by regulators, ended a court fight with the unit by agreeing to split tax benefits related to more than $2 billion in losses, an attorney said.
The unit, PMI Mortgage Insurance Co., will be allowed to apply $1 billion of the losses to cut its future tax bills, PMI Group attorney Joseph Barry told the judge overseeing the company’s bankruptcy today.
“As a result of mediation, we have reached a settlement,” Barry said.
PMI Group, based in Walnut Creek, California, filed for bankruptcy last year, just weeks after the Arizona Department of Insurance seized PMI Mortgage, the main operating unit. PMI Group listed assets of $225 million and debt of $736 million in its bankruptcy petition.
PMI pays lenders after a homeowner defaults and a foreclosure fails to recover enough to cover the mortgage. The company lost money amid the worst slump in U.S. housing prices since the Great Depression.
PMI Group and regulators from the state of Arizona, which now controls PMI Mortgage, had been scheduled to make final arguments in U.S. Bankruptcy Court in Wilmington, Delaware, over which should control the tax benefits of the losses.
Instead, the two sides held a telephone conference with U.S. Bankruptcy Judge Brendan Linehan Shannon to announce the deal, which must be put in the form of a binding contract. That contract will then be submitted for approval by Shannon and the Arizona judge overseeing the regulators’ receivership case.
The case is In re PMI Group Inc., 11-bk-13730, U.S. Bankruptcy Court, District of Delaware (Wilmington). The Arizona case is State of Arizona v. PMI Mortgage Insurance Co., CV2011-018944, Arizona Superior Court, Maricopa County (Phoenix).
-- Editors: Michael Hytha, Andrew Dunn