Mortgage Insurer Moving To Guaranty Sub-Prime Mortgages

The Mortgage-Pro · Site Admin Joined: 19 Jan 2005 Posts: 2248

Philadelphia-based Radian Group, a real estate loan insurer, has completed a transaction that will help it manage risk on non-prime mortgage loans, which generally go to people who are riskier because they don't qualify for prime loans under normal terms.

Radian completed its second structured finance transaction with Smart Home Reinsurance 2005-1 Limited. The transaction was created and funded through the sale of $98.5 million of credit-linked notes backed by a $1.68 billion pool of Radian-insured Alt-A mortgage loans.

The transaction better positions Radian to insure loans to people who don't qualify for prime loans under normal terms.

The Smart Home transaction allows transfer of the risk to Smart Home, which gives Radian more capacity to work with other lenders in the non-prime market. Lenders now have a better ability to operate in the non-prime market, according to David Cheung, a Radian spokesman.

"The non-prime segment of the mortgage insurance market is profitable, but it also requires a disciplined approach to risk management," said Roy Kramer, president and chief operating officer of Radian, in a statement.

In late January, Radian reported that its fourth-quarter net income skyrocketed to $156 million, or $1.62 per share, up 181 percent from fourth-quarter 2003 when its income was $55.5 million, or $.57 per share.

Radian is a credit enhancement provider to the global financial and capital markets. Radian's subsidiaries provide products and services through three business lines: financial guaranty, mortgage insurance and other financial services.