Fitch Withdraws Ratings on Radian

In the literary world, it’s called the denouement — the series of events that serve to wrap up a dramatic turn or climax of a story. After a public row with Radian Group Inc. (RDN) late last year over a ratings downgrade that the mortgage insurer didn’t feel was appropriate, Fitch Ratings said Friday that it had withdrawn its ratings of the company and its subsidiaries. Which, in some ways, serves as the rather anti-climactic conclusion to the saga between the two. “Fitch believes information available to it is no longer adequate to maintain credible ratings under its existing methodologies used in the mortgage insurance and financial guaranty industries,” the rating agency said via a press statement, “which involve the use of capital models that employ detailed, non-public information on Radian’s insured portfolios.” Fitch noted that Radian ceased working with the agency altogether last September. At the time, Radian said the downgrade created “unmerited uncertainty” about the insurer’s future, and charged Fitch with being inconsistent relative to competing agencies Standard & Poor’s and Moody’s Investors Service. Fitch, for its part, has steadfastly maintained that its criteria are simply more stringent, leading to a more conservative ratings approach. The fight became somewhat of a moot point in early April, when Standard & Poor’s cut Radian’s insurer financial strength rating below the level required by each GSE to maintain so-called Tier I status. Radian made no such public protest of S&P’s move, and sources told HW that at least some Fitch execs saw the S&P cut as vindication for what was characterized by one source as “more conservative modeling.” Radian this week said it had reached amended terms with creditors that would keep the ratings downgrade from causing the it to default under debt covenants it had previously agreed to. Disclosure: The author owned no positions in RDN when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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