MGIC Investment and Radian Group Shares Rise After Preliminary Deal Between MGIC and Freddie Mac Announced
November 02 2012 - 8:20AM
Marketwired
Mortgage insurers have experienced a resurgence in 2012 as the U.S.
housing market has continued its steady recovery. Recent data from
the Commerce Department has shown that home sales in the U.S. are
at its fastest annual pace in over two years. Five Star Equities
examines the outlook for companies in the Property & Casualty
Insurance Industry and provides equity research on MGIC Investment
Corp. (NYSE: MTG) and Radian Group Inc. (NYSE: RDN).
Access to the full company reports can be found at:
www.FiveStarEquities.com/MTG www.FiveStarEquities.com/RDN
"All the things that were really holding back housing are
finally starting to lift," said Guy Berger, a U.S. economist at RBS
Securities Inc. "It really is tough to find any bad signs here.
Inventories are very, very lean. Assuming the economy remains on
track, housing should continue to improve for the rest of the year
and into 2013."
Mortgage guarantors have also received a lift from a preliminary
deal between MGIC Investment and Freddie Mac resolving a coverage
dispute, which would have prevented the insurer from backing some
loans. As was the case with MGIC, soured home loans have caused
some insurers to breach the 25-to-1 ratio of risk relative to
capital preventing them from selling new coverage.
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Under the agreement MGIC will make payments to Freddie Mac over
the next four years. "While there can be no guaranty the open
matters can be successfully resolved, I am hopeful we will continue
to make progress," CEO Curt Culver said in a statement. For the
first half of the year the company had recorded a net loss of
$293.4 million. The company is scheduled to release third quarter
results on November 9, 2012.
Radian Group is a credit enhancement company with a focus on
domestic, first-lien residential mortgage insurance. Shares of the
company jumped sharply after reporting a profit for the first time
in 2012. For the third quarter of 2012 Radian reported a net income
of $14.3 million, or 11 cents per share, analysts had estimated a
loss of $0.59 per share according to FactSet.
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