A major mortgage insurer has signed a deal with Freddie Mac to reduce its exposure to thousands of delinquent loans.
Radian Guaranty has said it has entered into an agreement to eliminate its claim exposure on 9,756 delinquent loans, as well as 4,586 loans that were re-performing. The company paid around $255m to Freddie Mac to cover claim exposure on the loans, and had previously paid $370m on claims on the loans.
The insurer said it expected to incur a loss of around $20m in the third quarter in connection with the deal, but said the loss would be offset by a reduction of incurred losses in the future as a result of eliminating exposure to re-performing loans that could redefault in the future.
“One of our top priorities for our mortgage insurance business is to actively reduce our legacy exposure,” Radian CEO S.A. Ibrahim said. “This agreement is an important step in resolving our remaining legacy risk, and reduces our total number of primary delinquent loans by 12.6%."