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MGIC Comments on Captive Reinsurance Consent Order Settlement

        MGIC Comments on Captive Reinsurance Consent Order Settlement

PR Newswire

MILWAUKEE, April 4, 2013

MILWAUKEE, April 4, 2013 /PRNewswire/ -- MGIC Investment Corporation's (NYSE:
MTG)principal subsidiary, Mortgage Guaranty Insurance Corporation ("MGIC"),
commented on the consent order settlement announced today by the Consumer
Financial Protection Bureau (the "Bureau") to resolve a previously disclosed
investigation of captive reinsurance transactions in the mortgage insurance
industry. The settlement is subject to approval by the U.S. District Court
for the Southern District of Florida.

The settlement results from a nearly five-year-old industry-wide investigation
into captive reinsurance arrangements originally commenced by the U.S.
Department of Housing and Urban Development ("HUD") in 2008. HUD subsequently
transferred its investigation to the Bureau. MGIC cooperated fully with the
Bureau during the investigation.

The complaint filed by the Bureau with the U.S. District Court todayalleges
that certain captive reinsurance transactions entered into by MGIC violated
the Real Estate Settlement Procedures Act ("RESPA") because the projected
value of the reinsurance was less than the reinsurance premiums paid by MGIC
to the reinsurer. As the consent order settlement recites, the settlement is
not "an adjudication of any fact or legal conclusion" and will not have "any
preclusive effect in any other action or proceeding." Likewise the consent
order makes clear that "MGIC is not making any evidentiary admissions of
liability" for the practices alleged.

In 1997, HUD issued guidance to the mortgage industry indicating that properly
structured captive reinsurance transactions were not prohibited by RESPA.
MGIC believes its reinsurance arrangements were structured in accordance with
that longstanding guidance. Among other things, MGIC obtained actuarial
opinions from independent actuaries reflecting that the reinsurance premiums
paid by MGIC were reasonably related to the risk assumed by the captive
reinsurers. In addition, borrowers received notice from their lender that the
borrower's loan might be reinsured by an affiliate of the lender. As part of
the notice, each borrower was given an "opt-out" right to exclude his or her
loan from the captive reinsurance transaction.

Significantly, MGIC's captive reinsurance transactions caused no harm to any
borrower because MGIC's premium rates were not based on, or affected by,
captive reinsurance. Moreover, given the significant downturn in the housing
market over the past 5 years and the more than ten billion dollars of claims
MGIC has paid, MGIC's premium rates were not artificially high.

Captive reinsurance was commonly used by mortgage insurers in the past to
stabilize claims experience and protect against catastrophic losses. Indeed,
MGIC received nearly $900 million in loss reimbursements from its captive
reinsurers. These reimbursements provided much needed capital to MGIC that
helped MGIC survive the worst of the housing downturn.

As part of the settlement, MGIC agreed that it would not enter into any new
captive reinsurance agreement or reinsure any new loans under any existing
captive reinsurance agreement for a period of ten (10) years. In fact it had
voluntarily suspended most of its captive arrangements in 2008 in response to
market conditions and GSE requests. MGIC also agreed to pay a civil money
penalty in the amount of $2.65 million. MGIC's payment is part of the $15.4
million in penalties the Bureau announced, and is the lowest amount (by more
than $1 million) paid by the three other settling mortgage insurers.

"We are pleased to put this matter behind us and believe that this settlement
is in the best interests of the Company and its customers," the Company said.

About MGIC

MGIC is the nation's largest private mortgage insurer as measured by $162.1
billion primary insurance in force covering 1.0 million mortgages as of
December 31, 2012. MGIC serves lenders throughout the United States, Puerto
Rico, and other locations helping families achieve homeownership sooner by
making affordable low-down payment mortgages a reality.

From time to time, MGIC Investment Corporation releases important information
via postings on its corporate website without making any other disclosure, and
it intends to continue to do so in the future. Investors and other interested
parties are encouraged to enroll to receive automatic email alerts and Really
Simple Syndication (RSS) feeds regarding new postings. Enrollment information
can be found at http://mtg.mgic.comunder Investor Information.

SOURCE MGIC Investment Corporation

Website: http://www.mgic.com
Contact: Investors, Michael J. Zimmerman, (414) 347-6596,
mike_zimmerman@mgic.com, or Media, Katie Monfre, (414) 347-2650,
katie_monfre@mgic.com
 
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