Triad May Cease Writing New MI

Triad Guaranty Corp., Winston-Salem, N.C., has raised the possibility of going into run-off and ceasing the writing of new mortgage insurance policies. The disclosure came in the company's delayed 10-K filing, which had been on hold because Triad said it was in discussions with an unnamed potential investor. The filing says the company needs to "significantly augment our capital resources in the second quarter of 2008 in order to preserve our ability to continue to write new insurance." But it has not yet succeeded in finding an investor. Meanwhile, Fitch and Moody's have cut the company's ratings. Fitch reduced the insurer financial strength rating from AA-minus to BBB-minus, while Moody's cut its IFS rating from Aa3 to Baa3 and kept it on review for a further possible downgrade. The Fitch move caused Freddie Mac to require Triad to come up with a remediation plan. Under a new Freddie Mac policy, Triad was not automatically dropped from a Type I to a Type II insurer when the rating was cut. Freddie said Triad has 90 days to submit the plan for approval, after which Freddie will determine whether to drop Triad into the Type II category, which imposes additional capital requirements and operational restrictions. Fannie Mae said it is in touch with Triad's management and that the company remains an approved mortgage insurance provider.