Radian Group Inc. and MGIC Investment Corp. surged in New York trading after a U.S. regulator softened mortgage insurers' standards on some loans.
Radian jumped 5.9% to $18.16 at 10:02 a.m., the most since August. Milwaukee-based MGIC climbed 5.1%.
The Federal Housing Finance Agency announced rules Friday that eased capital requirements on some loans from 2005 through 2008, when compared with measures that were proposed by the regulator in July. Mortgage insurers were hobbled by guarantees issued in those years, because housing prices collapsed soon after. The final rules grant relief on loans from that period in cases where borrowers steadily met their commitments.
"We view it as a big win" for MGIC and Philadelphia-based Radian, Darren Marcus and Harry Fong of MKM Partners said in a note to clients Monday.
Mortgage insurers cover losses when homeowners default. Fannie Mae and Freddie Mac, the government-owned, mortgage-investment companies that are overseen by the FHFA, require insurance when homeowners make down payments below 20%.
The new standards are designed to ensure there's no repeat of what happened after the financial crisis, when a plunge in home prices pushed about half the industry out of the business. Fannie Mae and Freddie Mac were saddled with losses when insurers were unable to honor their obligations.
Mortgage insurers that began selling coverage after the depths of the financial crisis had more modest moves in New York trading. Essent Group Ltd. slipped 0.2%. NMI Holdings Inc. rose 2%.
Radian, which sold a unit this month for about $800 million, could comply with the new capital rules immediately by using about $330 million in liquid assets, the insurer said Friday. The standards are effective Dec. 31, and MGIC said it will probably be in compliance by then, though there was a shortfall of about $230 million as of March 31.
Genworth Financial Inc. said it had a shortfall of as much as $700 million and plans to meet the standards by the effective date. The Richmond, Va.-based company, which also sells life insurance and long-term care coverage, dropped 0.8%.
