Two pieces of news provide a flicker of hope amid the doom and gloom.
Item 1.01. Entry Into a Definitive Material Agreement.
On December 20, 2012, Freddie Mac agreed to extend its conditional approval of
Radian Mortgage Assurance Inc. ("RMAI"), a wholly owned subsidiary of Radian
Guaranty Inc. ("Radian Guaranty"), as a limited mortgage insurer (a "Limited
Insurer") for an additional one year period that will expire on December 31,
2013 (the "Amended Approval"). As previously disclosed, on February 28, 2012,
Freddie Mac conditionally approved our use of RMAI as a Limited Insurer to write
business in certain states (the "RBC States") in the event Radian Guaranty fails
to comply with the applicable state's risk-based capital requirements and Radian
Guaranty has not been granted a waiver or other similar relief from such
risk-based capital requirements after trying in good faith to obtain such relief
(the "Original Approval"). Under the Original Approval, RMAI currently is
eligible to write business in New York, Ohio, Iowa, Kansas and, subject to
certain conditions, Oregon, with the approvals for the remaining RBC states to
be evaluated by Freddie Mac when and if such approvals may be required. By its
terms, the Original Approval was scheduled to expire on December 31, 2012.
In addition to the states approved under the Original Approval, the Amended
Approval also approves RMAI to write business in Idaho provided that Radian
Guaranty continues its efforts to obtain a waiver approval or denial from Idaho
state insurance regulators. Further, the Amended Approval requires us to
diligently pursue an extension of existing waivers beyond their current
expiration dates, including those waivers in California, Florida, Illinois and
New Jersey that expire as of the end of 2012. We have submitted requests in each
of these states for an extension of the existing waivers. To the extent that any
such extension is not granted, we are required to seek further modification of
the Amended Approval to allow us to use RMAI in such states.
The Amended Approval includes an additional condition related to the time-frame
by which Radian Guaranty evaluates and internally resolves claims. Specifically,
the Amended Approval provides that: (1) within 120 days of the Amended Approval,
Radian Guaranty will pay to Freddie Mac or otherwise resolve internally a
majority of all claims outstanding greater than 90 days; and (2) going forward,
a majority of claims must be paid or otherwise resolved internally within 90
days of the date the claims are perfected. In all other respects, the terms and
conditions of the Amended Approval are substantially the same as those in the
Original Approval (a copy of which has been filed as Exhibit 10.66 to Radian
Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011).
As was the case with the Original Approval, Freddie Mac, in its sole discretion,
may modify the terms and conditions of the Amended Approval or withdraw it. This
summary of the terms and conditions of the Amended Approval is qualified in its
entirety by reference to the full text of the approval which is attached as
Exhibit 10.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
10.1 Letter dated December 20, 2012, from Freddie Mac to Radian Guaranty Inc.
and Radian Mortgage Assurance Inc.