In order for Radian Group to continue writing new mortgage insurance policies in 2010 and beyond, the company is considering a number of alternatives, including reactivating a subsidiary, said chief executive S.A. Ibrahim.
Speaking at the Barclays Capital Global Financial Services Conference, he said the company is exploring the use of its Amerin Guaranty subsidiary to write new business in the 14 states that have risk-to-capital limits if necessary. The company supports industry efforts for regulatory or statutory relief by reducing the 25-to-1 risk requirement in those states. Among the states where such action has recently occurred is Arizona. Radian is also evaluating its reinsurance relationships in order to reduce its risk-to-capital ratio.
As of June 30, Radian was in compliance with a risk-to-capital ratio of 15.9-to-1. But, Ibrahim said, this ratio is sensitive to future defaults, so it has those initiatives underway. Depending on regulatory approval, one or both can be in place.
When asked by an attendee why loans are less likely to cure in this downturn than in the past, Ibrahim said his opinion was that the decline in home values removed the opportunity for a borrower in trouble to have the ability to sell the property and get out of trouble.