Bloomberg News

Radian Credit Rating Cut by S&P on Mortgage Risk (Update2)

February 13, 2008

Radian Group Inc., (RDN:US) the third-largest U.S. mortgage insurer, had its credit rating cut by Standard & Poor's today because of expected losses from reimbursing lenders that made bad loans.

PMI Group Inc., Triad Guaranty Inc. (TGIC:US) and mortgage insurance units at American International Group Inc. (AIG:US) and Genworth Financial Inc. (GNW:US) may also be downgraded, the ratings company said in a statement.

``Deterioration in the housing markets and performance of all types of mortgages has caused Standard & Poor's to revise its expectations for all U.S. mortgage insurers' loss costs from mortgages originated in 2005, 2006, and 2007,'' credit analyst James Brender said in the statement. ``We also have concerns that the 2008 vintage could be unprofitable.''

Higher defaults by subprime borrowers propelled a jump in claims last year, leading Philadelphia-based Radian and larger rivals PMI and MGIC Investment Corp. (MTG:US) to their first money-losing quarters as publicly traded companies in the period ended Sept. 30. MGIC, which reported a $1.47 billion fourth-quarter loss (MTG:US) today, was placed on CreditWatch on Jan. 24.

U.S. foreclosure rates have risen to their highest since at least World War II, and defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, according to the Mortgage Insurance Companies of America trade group.

Radian's credit rating was cut to A- from A. The new rating is four levels among non-investment grade

AIG's United Guaranty Corp. and Genworth's mortgage insurance subsidiaries are rated AA, and Triad is rated AA-. PMI is rated A and MGIC is A-.

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.

To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net.


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Companies Mentioned

  • RDN
    (Radian Group Inc)
    • $14.23 USD
    • -0.19
    • -1.34%
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