Radian Plans Effort to Restore Profitabilty to MI Subsidiary
After watching its mortgage insurance arm's rating cut to A from AA- earlier this month, Radian Group Inc. (RDN) said Monday that it will work to "restore profitability and a AA rating" to its MI business, Radian Guaranty Inc. The commitment comes after the insurer submitted its remediation plan to both Fannie Mae (FNM) and Freddie Mac (FRE) ahead of schedule, it said in a press statement. "We have been maintaining a frequent and productive dialog with the GSEs about the market downturn and its impact on our business since last year," said Dave Applegate, president of Radian Guaranty. "At our respective April 10 meetings with both GSEs, we presented detailed plans on the transformation of Radian Guaranty." Although neither GSE has publicly commented on Radian's proposed plan, both GSEs have recently indicated that the information presented on April 10th meets their requirement for the submission of information as a result of a downgrade. While details on the plan are not readily known, the company said that it expects its return to AA-rated status will take time, characterizing it as "a long-term endeavor" that will include regular progress reports to each of the GSEs. The insurer has already begun scaling back key programs in an effort to prevent future losses, including eliminating all "stated asset" programs that allow a borrower to claim assets that aren't verified prior to lending. It has also increased pricing in other programs. News of Radian's commitment to its MI business -- as opposed to letting it run-off -- sent shares slightly higher Monday, up 1.8 percent in mid-afternoon trading. For more information, visit http://www.radian.biz. Disclosure: The author held 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.