Radian In Deal With Freddie Mac Over Delinquent First-Lien Mortgage Loans

(RTTNews) - Radian Guaranty Inc., the mortgage insurance unit of Radian Group Inc. (RDN), Thursday announced a Master Transaction deal with Freddie Mac, related 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 2011.

The deal 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 about $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 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In addition, as of July 2013, another $140 million of submitted claims had been rescinded, denied or curtailed but were not considered final under the Agreement.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 expects to record an incurred loss of about $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.