- Implementation of PMIERs Updates is not expected to materially impact Radian Guaranty's capital position or PMIERs cushion
Radian Guaranty Inc., the principal mortgage insurance subsidiary of Radian Group Inc. (NYSE:RDN), announced that updates to the Private Mortgage Insurer Eligibility Requirements (PMIERs) that were issued today by Fannie Mae and Freddie Mac (PMIERs Updates), are not expected to have a material impact on Radian Guaranty's capital position or PMIERs cushion. In addition, given the limited expected impact, the Company does not believe the PMIERs Updates will require Radian Guaranty to adjust its investment portfolio asset allocation. Instead, the Company expects that any future changes to Radian Guaranty's investment portfolio will continue to be made in the ordinary course in pursuit of the Company's investment return objectives.
The PMIERs Updates refine the standards for Available Assets under the PMIERs, which include the most liquid assets of a mortgage insurer available to pay claims. While the PMIERs do not prohibit a mortgage insurer from holding any type of assets, the new updates further limit the Available Asset credit that mortgage insurers receive under the PMIERs for certain asset types based on several factors, including, among others, asset class and credit rating. Under the PMIERs Updates, the impact of reductions in Available Asset credit resulting from the changes is being phased-in over a two-year period, with 25% of the calculated adjustment to be implemented as of March 31, 2025, 50% as of September 30, 2025, 75% as of March 31, 2026, and 100% as of September 30, 2026.
At June 30, 2024, Radian Guaranty's Available Assets under the PMIERs totaled approximately $6.0 billion, resulting in PMIERs excess Available Assets over Minimum Required Assets (or a "cushion") of $2.2 billion. Based on Radian Guaranty's investment portfolio as of June 30, 2024, and without giving consideration to any potential changes in the portfolio other than the normal amortization of investments, the Company expects the PMIERs Updates to reduce Radian Guaranty's PMIERs Available Assets by less than 0.3%, or approximately $20 million, as of March 31, 2025, the initial implementation date when 25% of the total impact of the updates is required to be implemented.
As part of the PMIERs Updates, the GSEs also updated the treatment (or haircut) of Minimum Required Assets under the PMIERs for loans subject to COVID-19 forbearance plans now that the COVID-19 national emergency has ended. Effective March 31, 2025, loans that remain subject to a COVID-19 forbearance plan will no longer qualify for the COVID-19 haircut to the Minimum Required Assets and will instead revert to the standard non-performing loan requirements of PMIERs. As of the March 31, 2025, effective date, the Company expects the elimination of the haircut related to COVID-19 forbearance plans to increase Radian Guaranty's Minimum Required Assets by less than $10 million.
"PMIERs has been a valuable capital framework for our industry, promoting the consistent, transparent, and reliable financial strength of private mortgage insurers through various credit cycles," said Chief Executive Officer, Rick Thornberry. "We are pleased that our relationship with the GSEs and the FHFA helps us to increase access to mortgage credit and support our customers in providing affordable, sustainable homeownership opportunities."
More information on the updated PMIERs guidance may be found on the FHFA's website.
About PMIERs
Private mortgage insurers such as Radian Guaranty must meet the GSEs' eligibility requirements, or PMIERs, in order to be eligible to insure loans purchased by the GSEs. The PMIERs were first issued by the GSEs under oversight of the FHFA and became effective on December 31, 2015. The PMIERs financial requirements incorporate a risk-based framework that requires a mortgage insurer's Available Assets to meet or exceed its Minimum Required Assets. The PMIERs financial requirements include increased financial requirements for defaulted loans, with increasing Minimum Required Assets as defaults age, as well as for performing loans that present a higher likelihood of default and/or certain credit characteristics.
About Radian
Radian is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, real estate, securitization, and title services. Powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk, Radian is shaping the future of mortgage and real estate services. Learn more at radian.com.
Forward-Looking Statements
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All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," "seek," "strategy," "future," "likely" or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements in this press release are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:
- the health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including changes resulting from inflationary pressures, the higher interest rate environment and the risk of higher unemployment rates, as well as other macroeconomic stresses and uncertainties, including potential impacts resulting from political and geopolitical events;
- our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy current and future regulatory requirements;
- any further changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, such as changes in the PMIERs or the GSEs' interpretation and application of the PMIERs or other applicable requirements;
- U.S. political conditions, which may be more volatile and present a heightened risk in Presidential election years, and legislative and regulatory activity (or inactivity), including adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied; and
- the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which could be impacted by, among other things, the type of investments we hold and their credit ratings, the size and mix of our IIF, the level of defaults in our portfolio, the reported status of defaults in our portfolio (including whether they are subject to mortgage forbearance, a repayment plan or a loan modification trial period), the level of cash flow generated by our insurance operations and our risk distribution strategies.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission.
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