Radian Group Inc., the third-largest mortgage insurer, said Wednesday that it expects to maintain its "long-standing top-tier status" with Fannie Mae and Freddie Mac, the companies that buy the loans it insures.
The Philadelphia insurer is "very encouraged by the productive discussions we have" with the government-sponsored enterprises "on an ongoing basis," S.A. Ibrahim, Radian's chief executive officer, said at a New York conference sponsored by KBW Inc.
Radian's stock gained as much as 22% during Wednesday's session.
In a slide show on its Web site posted in advance of its presentation at the conference, Radian said, "We have been working closely" with Fannie and Freddie and "will continue to have frequent, productive discussions with them."
In the year that ended June 30, Radian lost $1.62 billion as it paid record claims in response to the steepest housing price declines since the Great Depression. Its larger competitors, MGIC Investment Corp. and PMI Group Inc., also posted record losses. In June, Triad Guaranty Inc., the seventh-largest mortgage insurer, became the first to stop selling policies after Freddie disqualified the company as a guarantor of new home loans.
"Maintenance of top-tier status with government-sponsored enterprises is absolutely critical to Radian," said David Havens, a credit analyst for UBS AG in Stamford, Conn. "Inability to do so could effectively place the company into hibernation."
Radian and its rivals have tightened their underwriting standards and raised their prices for mortgage insurance this year as a record number of homeowners have failed to keep up with payments.
Mr. Ibrahim said Wednesday that his company has been increasing its sales force "significantly" as lenders have sought to lower their risk and make their loans more attractive to investors.
Standard & Poor's Corp. said last week that the improved underwriting may have come too late to stem further losses in the industry if rising unemployment and declining home prices trigger further claims.
Last week the agency cut Radian's counterparty credit rating two notches, to BB-plus, a rating considered below investment grade.
