Radian Announces Agreement with Freddie Mac
Company eliminates claim exposure on 9,756 delinquent loans
PHILADELPHIA--(BUSINESS WIRE)--Aug. 29, 2013--
Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group
Inc. (NYSE: 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2013, another $140 million of submitted claims had been rescinded,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.
About Radian
Radian Group Inc. (NYSE: 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.com.
Forward-Looking Statements
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.
Source: Radian Group Inc.
Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.com
