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Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group Inc., today announced that on December 20, 2012, Freddie Mac agreed to extend its approval of Radian Mortgage Assurance Inc. (RMAI), a wholly owned subsidiary of Radian Guaranty, as a limited eligible mortgage insurer for an additional one-year period that will expire on December 31, 2013. As previously disclosed, RMAI maintains a similar approval for the same time period from Fannie Mae.
As of September 30, 2012, Radian Guaranty maintained a risk-to-capital ratio of 20.1:1, which is below the 25:1 risk-to-capital limit imposed by certain states. In the event Radian Guaranty is no longer in compliance with the risk-based capital requirements of certain states, the company plans to write new mortgage insurance business in those states through state-specific waivers or similar relief, or by using RMAI. The amended approval from Freddie Mac does not require any capital contributions from Radian Group to Radian Guaranty or RMAI beyond those required under the original approval. Based on the original approval, as previously announced, Radian Group contributed $100 million to Radian Guaranty in February 2012, and is required to contribute $50 million of additional capital to RMAI only in the event that Radian Guaranty were to exceed the risk-based capital requirements of those states for which a waiver or other relief has not been obtained. RMAI currently has $19 million of existing capital.
“Our top priority at Radian is to continue writing new, high-quality mortgage insurance business. This helps to improve the credit composition of our mortgage insurance book and better position Radian for a return to operating profitability next year,” stated Chief Executive Officer S.A. Ibrahim. “The support of our stakeholders is critical to this effort and the extension of Freddie Mac’s approval of RMAI is an illustration of that support.”
In addition to the states approved under the original agreement with Freddie Mac, the amended approval also approves RMAI to write business in Idaho provided that Radian Guaranty continues its efforts to obtain a waiver approval or denial from Idaho state insurance regulators. Further, the amended approval requires Radian Guaranty to diligently pursue an extension of existing waivers beyond their current expiration dates, including those waivers in California, Florida, Illinois and New Jersey that expire as of the end of 2012. The company has submitted requests in each of these states for an extension of the existing waivers. To the extent that any such extension is not granted, Radian Guaranty is required to seek further modification of the amended approval to allow the company to use RMAI in such states.