Radian Announces Agreement with Freddie Mac
Radian Announces Agreement with Freddie Mac
Company eliminates claim exposure on 9,756 delinquent loans
PHILADELPHIA--(BUSINESS WIRE)-- Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group Inc. (NYS: RDN) , today announced that it entered into a Master Transaction Agreement with Freddie Mac on August 29, 2013. The Agreement relates to a group of 25,760 first-lien mortgage loans held by Freddie Mac that were insured by Radian Guaranty, and were delinquent as of December 31, 2011. The Agreement provides for the future treatment of these loans including claim payments, loss mitigation activity and insurance coverage, and eliminates Radian Guaranty's claim exposure on 9,756 loans that were delinquent and 4,586 loans that were re-performing as of July 31, 2013.
"One of our top priorities for our mortgage insurance business is to actively reduce our legacy exposure," said Radian's Chief Executive Officer S.A. Ibrahim. "This agreement is an important step in resolving our remaining legacy risk, and reduces our total number of primary delinquent loans by 12.6 percent."
The Agreement caps Radian Guaranty's total exposure on this group of loans, including loans that are currently re-performing, to $840 million. Radian Guaranty paid approximately $255 million to Freddie Mac to cover claim exposure on these loans, and had previously paid $370 million of claims on these loans. Radian Guaranty also deposited $205 million in a collateral account to cover loss mitigation activity on these loans. Amounts in the collateral account will be released to Radian Guaranty to the extent that Radian Guaranty rescinds, denies, or curtails these loans and such amounts become final under the Agreement. As of July 31, 2013, the amount of insurance rescissions, claim denials or claim curtailments that had become final in accordance with the Agreement was approximately $10 million. In addition, as of July 31, 2013, another $140 million of submitted claims had been rescinded, denied or curtailed but were not considered final under the Agreement. If the loss mitigation activities do not accumulate to $205 million, any remaining funds will be paid to Freddie Mac. Radian Guaranty will administer all claims submitted with respect to these loans in accordance with its insurance policy for these loans and in a manner consistent with its normal claims handling practices.
Radian expects to record an incurred loss of approximately $20 million in the third quarter in connection with the transaction, which is expected to be fully offset by a reduction of incurred losses in future periods. This future reduction of incurred losses will result from the elimination of exposure to re-performing loans covered by the transaction that may redefault in the future and ultimately become claims.
Radian Group Inc. (NYS: RDN) , headquartered in Philadelphia, provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.biz.
Some of the statements in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are used to identify these forward-looking statements. These forward-looking statements, which may include without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2012, and in Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.
Radian Group Inc.
Emily Riley, 215-231-1035
KEYWORDS: United States North America Pennsylvania
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