Government-sponsored enterprise (GSE) Freddie Mac (FRE) approved PMI Mortgage Assurance Co. (PMAC) as a direct issuer of mortgage guaranty insurance. PMAC is a newly formed subsidiary of PMI Mortgage Insurance Co. (MIC), the principal operating subsidiary The PMI Group (PMI). The approval means PMAC can write new mortgage insurance business in certain states in the event MIC fails to meet capital requirements and is ordered to cease writing new insurance in those states. PMI said PMAC holds around $28m in capital. At least in Arizona, the company can continue to write new insurance through MIC, rather than the PMAC unit. MIC in February received approval from the Arizona Department of Insurance to continue writing new mortgage insurance business even if PMI falls below state capital requirements. Freddie’s approval of PMAC will remain in effect until Dec. 31, 2011. It arrives after sister GSE Fannie Mae (FNM) in February granted similar approval. Shares of PMI shot up 14% in early morning trading following Freddie’s announcement. PMI in February reported losses of $228.2m – or $2.76 per share – in Q409 as mortgage defaults continue to put financial pressure on the company’s mortgage insurance business. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.

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