Updated from 10:28 a.m. EST
Federal regulators are probing mortgage insurers
over their failed merger and joint venture in an investment vehicle focused on risky mortgage-backed securities, according to the two companies.
In separate quarterly reports filed Wednesday with the
Securities and Exchange Commission
, MGIC and Radian said the commission's Division of Enforcement in October had requested documents and other information primarily related to their joint venture, Credit Based Asset Servicing and Securitization, or C-Bass, their failed merger and other subprime mortgage assets.
MGIC in August
sued Radian in federal court in Milwaukee, asking for more documentation after Radian advised the New York Insurance Department that it was "not obligated" to complete the all-stock, $4.7 billion merger the two companies had agreed to in February. Regulators and shareholders of both companies had approved the deal.
The two sides mutually agreed to scrap the merger in September, ending any outstanding litigation.
The beginning of the end for the merger came when the two companies in July said they
may have to write off investments in C-Bass, which saw "unprecedented losses" due to poor bets on collateralized debt obligations, or CDOs, related to subprime mortgages.
MGIC shares recently were down fractionally to $20.85, and Radian shares were flat at $10.74.