MGIC updates on Freddie Mac conditions
Sept 28 (Reuters) - MGIC Investment Corp said mortgage financier Freddie Mac has reduced the capital the mortgage insurer will need to add to its main unit, MGIC, in order to continue writing insurance throughout the United States.
Freddie Mac now requires the company to contribute $100 million, down from $200 million, to allow its new unit MIC to temporarily write mortgage insurance in more states.
The mortgage titan also extended the date by which the holding company has to pay the money to Dec. 1, 2012. Previously it was the end of September.
MGIC has been writing insurance after receiving waivers on its capital requirements from Fannie Mae and Freddie Mac and a number of state regulators over the last two years.
As of June 30, the preliminary risk-to-capital ratio of the company's combined insurance operations was 30-to-1, above the permissible limit set by most states.
MGIC's main unit also falls short of the minimum policyholder position - the amount needed to pay off claims - used by its primary regulator, the Wisconsin Insurance Commissioner (OCI), to gauge the health of an insurer.
The company said it would use its new unit MIC to write insurance in the jurisdictions in which it has not received capital waivers for the main unit. Mortgage insurers have been creating new units to find a way around soaring risk ratios.
Freddie Mac has also approved MGIC's new unit MIC to write new business in 16 states besides Wisconsin that have specific regulatory capital requirements.
The regulator has also extended MIC's approval to Dec. 31, 2013, from the end of 2012, offering a possible breathing space to the company. However, the extension is subject to certain conditions, including that the $100 million capital infusion be made by the specified date.
Freddie Mac also requires that the mortgage insurer settle the case it filed against the government-backed entity by Oct. 31.
MGIC Investment had sued Freddie Mac and the Federal Housing Finance Administration in May to settle a dispute over coverage limits on certain insurance policies.
Freddie Mac also wants the OCI, MGIC Investment's primary regulator, to provide written confirmation that MIC's capital will be available to pay off MGIC's claims, a suggestion that the OCI has objected to in the past.
MGIC Investment, Radian Group Inc and life insurer Genworth's mortgage unit protect lenders in cases where homebuyers make down payments below a certain threshold.
They have been struggling to recoup their losses after the housing bubble burst and foreclosures soared, saddling them with large claims on unpaid home loans and thin capital cushions.
MGIC Investment's shares closed at $1.53 on the New York Stock Exchange on Friday. They rose 13 percent to $1.74 in extended trading.