MGIC to pay $267.5 million to settle dispute with Freddie Mac
Nov 9 (Reuters) - Mortgage insurer MGIC Investment Corp said it would pay Freddie Mac $267.5 million to settle a dispute that had threatened to stop it from writing new insurance throughout the United States.
The company also reported a loss for the ninth straight quarter, sending its shares down as much as 9 percent on Friday.
The settlement was a condition set by Freddie Mac, the government-backed mortgage financier, to allow a new unit of MGIC to underwrite mortgages in seven states.
MGIC had sold Freddie Mac a pool of policies, the valuation of which became a bone of contention. The insurer filed a lawsuit in May seeking to pay less than what Freddie Mac believed the policies were worth.
The difference in the interpretations of the value of the policies is about $535 million.
In August, MGIC's shares slumped to an all-time low and the cost of insuring its debt soared when the settlement demands were made public.
As part of the settlement, MGIC agreed to pay $100 million when the deal is signed, and the remaining amount as monthly payments over the next four years.
MGIC said it is waiting for Freddie Mac to approve its newly capitalized unit to write insurance, before it signs the deal.
The insurer said it would contribute $100 million to the mortgage insurance unit to make the payment to Freddie Mac once the deal becomes effective.
MGIC posted a net loss of $246.9 million, or $1.22 per share, compared with $165.2 million, or 82 cents per share, a year earlier.
Shares of the company were down 4 percent at $1.62 on Friday morning on the New York Stock Exchange.
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