MBIA Announces High Mortgage Exposure

MBIA Inc, the world’s largest bond insurer, announced today that it had guaranteed 8.1 billion dollars of the riskiest mortgage securitiesThe company stated that it had guaranteed 30.6 billion dollars in complex mortgage securities in total. MBIA’s stock fell to a 13-year low on Thursday in its biggest one-day decline ever, bringing its total drop this year to more than 70 percent. The stock, which closed at $19.95 on Thursday, had hit a record high in January.

“We are shocked that management withheld this information for as long as it did,” Morgan Stanley said. “This new disclosure completely changes our view of MBIA being a ‘more conservative underwriter’ relative to Ambac,” the second-largest bond insurer, said a Morgan Stanley report co-written by analysts Ken Zerbe and Yoana Koleva.

MBIA is most vulnerable to guarantees on $8.1 billion of collateralized debt obligations, or CDOs, most of which includes the riskiest debt known as CDO squared, or CDOs backed by other CDOs. MBIA detailed its exposures on its Web site late on Wednesday. The company’s net worth as of Sept. 30 was $6.5 billion.

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