Amend: Fitch: PMI Facing Higher Losses & Less Liquidity; IFS Downgraded to 'BB'.

NEW YORK -- (This amends a press release published earlier today and contains details on the information Fitch used in coming to its rating conclusions in the last paragraph.)

Fitch Ratings has downgraded and removed the ratings of The PMI Group, Inc. (TPG) and subsidiaries (collectively, PMI) from Rating Watch Negative. The Rating Outlook is Negative. A list of affected ratings follows the end of this press release.

Today's rating actions reflect the loss expectations and capital constraints facing PMI as an independent mortgage insurance (MI) company. PMI has extremely limited access to the capital markets and, as a result, will largely have to rely on current capital resources to satisfy ongoing MI claims. PMI's rating reflects the company's limited capital resources in comparison to Fitch's expectations of continued losses and the risk profile of PMI's insured exposures relative to its peers. Fitch is concerned that PMI's earnings profile may exhibit greater than industry average volatility given PMI's relatively larger exposure to stressed regions, such as California and Florida, and Alt-A mortgages on the 2007 and prior vintages, a significant portion of which has yet to experience its peak loss years based on historical mortgage collateral loss development patterns.

Recently, TPG announced it had secured a temporary amendment to its $250 million credit facility, effective March 15, 2009 and expiring April 15, 2009, during which time the Company is seeking to negotiate a more permanent amendment to its credit facility. During the temporary amendment period, the minimum adjusted consolidated net worth covenant has been reduced to $1.2 billion from $1.5 billion and the maximum risk to capital ratio covenant has been increased to 24:1 from 20:1. In addition, the financial strength ratings event of default has been suspended. At year-end 2008, the risk to capital ratio for PMI was 18.5:1 compared to 10.8:1 at the end of 2007, and it is likely the company was close to breaching this leverage covenant.

The current amount drawn under the credit facility is $200 million, compared with approximately $236 million of cash on hand. In the event that TPG is unable to successfully restructure the bank facility and is forced to repay the $200 million outstanding, it would be left with approximately $36 million with which to fund interest payments of approximately $29 million per annum on its outstanding senior and junior notes, as well as fund any operating expenses (The approximated $36 million does not include the impact of a tax sharing arrangement TPG has with PMI US which may provide TPG with additional liquidity).

A default under the bank facility would lead to an acceleration of the outstanding $400 million of senior notes, causing them to become due and payable as well. In that event, the Company would not have sufficient liquidity to repay all of those obligations. In Fitch's opinion, a deferral of interest on the junior notes, while not announced by the Company, is increasingly likely as the Company seeks to maintain liquidity and negotiate a more permanent amendment to its credit facility. Fitch notes that the interest savings of such a deferral would be minimal.

The MI industry faces continuing challenges, including rising unemployment, home price depreciation and limited access to refinancing options for homeowners which in turn have contributed to rising delinquencies and losses within insured portfolios. Fitch expects that the MI industry will continue to face a challenging operating environment for the foreseeable future. Positively, Fitch recognizes the possibility of a stabilizing impact from the various initiatives by the U.S. government to reduce stresses in the U.S. housing market, however the timing and impact of any such initiatives remains uncertain.

For its current action, Fitch relied on public information on TPG and its subsidiaries as well as certain non-public information previously received from TPG regarding its mortgage insurance portfolio. However, Fitch no longer regularly meets with TPG management, nor does it receive non-public information from the company on an ongoing basis.

Fitch has downgraded the following ratings:

PMI Mortgage Insurance Co.

PMI Insurance Co.

PMI Mortgage Insurance Company Limited

--IFS to 'BB' from 'BBB+'.

The PMI Group Inc.

--Long-term issuer to 'CCC' from 'BB';

--$250 million 6% senior notes due Sept. 15, 2016 to 'CCC' from 'BB';

--$150 million 6.625% senior notes due Sept. 15, 2036 to 'CCC' from 'BB'.

PMI Capital I

--$51.593 million 8.309% junior subordinated debentures due Feb. 1, 2027 to 'CC' from 'BB-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.