News Column

Arch Mortgage Insurance Releases Summer Edition of Housing and Mortgage Market Review

August 6, 2014

Latest Arch MI Risk Indices Indicate Probability of Home Price Declines Remains Low to Moderate

WALNUT CREEK, Calif.--(BUSINESS WIRE)-- Arch Mortgage Insurance Company (“Arch MI”), a leading provider of private mortgage insurance and a wholly owned subsidiary of Arch Capital Group Ltd., today released the Summer 2014 Edition of its Housing and Mortgage Market Review and the latest Arch MI Risk IndexSM. The State- and MSA-Level risk indices analyze the likelihood of home prices in a state or metropolitan statistical area (“MSA”) being lower in two years, based on recent economic and housing market data.

“The latest findings of our Summer Housing and Mortgage Market Review indicate that the risk of home price declines in the next two years is generally low to moderate across all states and the nation’s 50 largest MSAs,” said Ralph DeFranco, Arch MI’s Senior Director of Risk Analytics and Pricing. “Based on the latest economic data and our proprietary statistical models, our analysis of regional home prices has found that the risk of home price decline remains unchanged from last quarter.”

Arch MI’s State-Level Risk Indexreports that scores remain relatively unchanged, compared to the prior quarter. Three states, Florida, New Jersey and New York, remain in the moderate risk category with Risk Indexscores of 38, 31 and 29, respectively. These states are of the greatest concern primarily due to higher-than-average unemployment and mortgage delinquencies. Encouragingly, the riskiest regions have improved over the past year. Improving economic and housing market conditions more than offset the modest decrease in affordability as home prices and rates have increased.

Arch MI’s MSA-Level Risk Index estimates the probability of home price declines in the next two years for 384 of the nation’s largest MSAs. Nine of the 50 most populous MSAs are in the moderate risk category; six MSAs in Florida and one MSA each in New Jersey, New York and California. All of these MSAs have shown year-over-year declines in their risk scores due to improvements in regional unemployment rates, offset by slightly less favorable affordability and slower economic growth (which was affected in the first quarter by severe weather).

   

Summer 2014 Arch MI Risk Index

 
10 Riskiest States and MSAs
       
   

10 Riskiest States

10 Riskiest MSAs

Risk

Rank

        State        

Risk

Index

       

Affordability

Index

Risk

Rank

        MSA        

Risk

Index

       

Affordability

Index

Moderate         Florida         38         150 Moderate        

Fort Lauderdale

Pompano Beach

Deerfield Beach; FL

        49         122
Moderate         New Jersey         31         148 Moderate        

MiamiMiami Beach

– Kendall; FL

        46         132
Moderate         New York         29         146 Moderate         Jacksonville; FL         46         153
Low         Nevada         24         167 Moderate        

Orlando

Kissimmee

Sanford; FL

        42         153
Low         Rhode Island         23         163 Moderate        

West Palm Beach

Boca Raton

Boynton Beach; FL

        42         127
Low         California         22         126 Moderate         Newark-Union; NJ-PA         37         146
Low         Maryland         19         155 Moderate        

Tampa-

St. Petersburg-

Clearwater; FL

        36         145
Low         Arizona         16         141 Moderate        

New York-

White Plains-

Wayne; NY-NJ

        34         134
Low         Connecticut         16         170 Moderate        

Riverside-

San Bernardino-

Ontario; CA

        32         123
Low         Illinois         13         186 Low         Nassau-Suffolk; NY         28         124
                                               


About Arch MI’s Housing & Mortgage Market Review and Risk IndexSM

The Housing & Mortgage Market Review,which presents Arch MI Risk IndexSM results, is published seasonally by Arch Mortgage Insurance Company. The Risk Index is a proprietary statistical model that measures geographic house price risk by estimating the probability that home prices in a state or one of the nation’s 384 largest metropolitan statistical areas (MSAs) will be lower in two years. The Arch MI Risk IndexSM combines and summarizes various local economic and housing market factors, such as affordability, unemployment rates, economic growth rates, net migration, housing starts, foreclosure rates. The weighting of these factors in the final index value is based on a statistical model that uses historical data going back to the early 1980s. It is updated after each quarterly release of the FHFA All-Transactions Regional Housing Price Index (HPI). The Arch MI Risk Index scale ranges from one to 100 and translates to a percentage. For example, a score of 25 indicates a 25 percent chance that home prices will be lower in two years.

A complete copy of the TheHousing & Mortgage Market ReviewSummer 2014 is available at www.archmi.com.

ABOUT ARCH MORTGAGE INSURANCE COMPANY (FORMERLY KNOWN AS CMG MORTGAGE INSURANCE COMPANY)

Arch MI is a leading provider of private insurance against mortgage credit risk. Headquartered in Walnut Creek, CA, Arch MI's mission is to protect lenders against credit risk, while extending the possibility of responsible homeownership to qualified borrowers. Arch MI was formed when Arch Capital acquired CMG Mortgage Insurance Company (CMG MI) and the mortgage insurance operating platform of PMI Mortgage Insurance Co. on January 30, 2014, creating a state-of-the-art mortgage insurance operation. Arch MI is licensed to write mortgage insurance in all 50 states, the District of Columbia and Puerto Rico. For more information, please visit www.archmi.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and our ability to maintain and improve our ratings; investment performance; the loss of key personnel; the adequacy of our loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; our ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to us of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to us; and other factors identified in our filings with the U.S. Securities and Exchange Commission.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.





Arch Mortgage Insurance Company

Bill Horning, 925-658-6193

or

Weber Shandwick

Liz Cohen, 212-445-8044


Source: Arch Mortgage Insurance Company


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