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Fannie Mae approved a subsidiary of Radian Guaranty ($14.02 0.29%) to insure new mortgages, according to an alert sent to lenders.
The Philadelphia-based insurer narrowed its losses in the fourth quarter but faces capital shortages. The Radian risk-to-capital ratio stood at 21.5-to-1 as of Dec. 31, and the company said it could crest over the 25-to-1 threshold required in many states this year.
Fannie has long approved the Radian parent company as a mortgage insurer, but the alert sent Tuesday cleared its subsidiary Radian Mortgage Assurance to cover home loans with note dates on or after Feb. 27.
The firm can decide whether the parent company or the subsidiary insures the loans based on state requirements, or it must receive a waiver. Radian will use the subsidiary to write insurance on Fannie Mae loans if it exceeds capital requirements in some states without a waiver.
A total of 16 states impose some risk-based capital requirements. Three states granted waivers to Radian — Illinois, Kentucky and Wisconsin, according to the latest tally in January.
In an effort to clear some capital room, the parent company sold its municipal bond insurance subsidiary to Assured Guaranty ($23.70 -0.145%) in January and ceded obligations on a $12.9 billion reinsurance portfolio.
In February, Radian trimmed its inventory of delinquent loans to 107,000, down from 109,000 the month before.
It wrote $2 billion in new insurance during the month, unchanged from January.
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