Radian Says Unit May Need Capital as U.S. Mulls Standards
Aug. 9 (Bloomberg) -- Radian Group Inc., the insurer whose stock more than doubled this year, said its unit guaranteeing home loans may need additional capital if U.S.-backed housing finance companies tighten their demands.
U.S. regulators are seeking to strengthen an industry that protects against losses at taxpayer-owned Fannie Mae and Freddie Mac, known as government-sponsored enterprises or GSEs. Radian and MGIC Investment Corp. (MTG) raised capital this year in stock and bond sales after surviving the housing slump that pushed rivals from the business.
“Eligibility requirements may include new capital standards for private mortgage insurers,” Philadelphia-based Radian said in a regulatory filing today. If the new rules include “more onerous” standards, “it is likely that we would need to provide additional capital support to, or arrange additional capital relief for, Radian Guaranty, including potentially, greater than anticipated capital contributions from Radian Group.”
President Barack Obama is pushing for the U.S. to scale back from its role in covering losses when home loans sour. He called for private capital to take more of the risk in the real estate market in a speech this week, as Fannie Mae and Freddie Mac are wound down.
Some regulators currently require mortgage insurers to maintain the ratio of risk to capital below 25-to-1. The new rules may require a ratio of about 18-to-1, Radian Chief Financial Officer Robert Quint said on a conference call with analysts last month. The ratio at Radian Guaranty was 19.7 to 1 as of June 30, the company said in a July 24 statement.
“We fully expect to have the ability to comply with any such requirements within the implementation timeframe,” Quint said on the call. Radian had about $816 million in liquidity at the holding company at June 30, he said.
Radian raised $689 million in this year’s offerings, and Milwaukee-based MGIC took in more than $1 billion. John Paulson, the billionaire hedge fund manager, invested in both companies as part of a bet on a housing-market recovery in the U.S.
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