UPDATE 1-Radian cuts dividend citing mortgage mkt volatility

NEW YORK, Aug 8 (Reuters) - U.S. mortgage and bond insurer Radian Group (RDN.N) said it was slashing its dividend to preserve capital amid the troubled U.S. mortgage market.

Radian cut its dividend by 87 percent to 0.25 cents per common share, from 2 cents a share in prior quarters.

"As a result of current volatility in the U.S. residential and mortgage markets, we believe this is an appropriate decision until we return to a more stable environment," Chief Executive S. A. Ibrahim said in a statement on Friday.

Radian shares have plunged over the last year as mortgage market losses grew. The shares closed at $2.74, down from a 52-week high of $26.72 in September 2007. In after-market trading the shares rose to $2.83.

Private mortgage insurance allows people to buy homes with downpayments of less than 20 percent, since the coverage guarantees lenders will be repaid even if borrowers default. But business has shrunk in recent months, as lenders have demanded bigger downpayments, and borrowers have had to meet stiffer income disclosure requirements.

(Reporting by Lilla Zuill, editing by Leslie Gevirtz)