We provide mortgage insurance and products and services to the real estate
and mortgage finance industries through our two business segments—Mortgage
Insurance and Services. Our Mortgage Insurance segment provides credit-related
insurance coverage, principally through private mortgage insurance, to mortgage
lending institutions nationwide. We provide our mortgage insurance products
mainly through our wholly-owned subsidiary, Radian Guaranty.
Our Services segment provides outsourced services, information-based analytics
and specialty consulting for buyers and sellers of, and investors in, mortgage-
and real estate-related loans and securities as well as other ABS. The primary
lines of business in our Services segment include: (1) loan review and due diligence;
(2) surveillance; (3) valuation and component services; (4) REO management services;
and (5) services for the United Kingdom and European mortgage markets through
our EuroRisk operations. These services and solutions are provided primarily
through Clayton and its subsidiaries, including Green River Capital, Red Bell
and ValuAmerica.
A key element of our business strategy is to use our Services segment to broaden
our participation in the residential mortgage market value chain by offering
a range of mortgage and real estate-related products and services that complement
our mortgage insurance business. This strategy is designed to satisfy an increasing
demand in the market, grow our fee-based revenues, strengthen our existing mortgage
insurance customer relationships, attract new customers and differentiate us
from our mortgage insurance peers. Our strategy for future growth includes expanding
our capabilities to increase the depth and breadth of mortgage and real estate
products and services we offer to the residential real estate and mortgage finance
markets.
Our Mortgage Insurance segment provides credit-related insurance coverage,
principally through private mortgage insurance, to mortgage lending institutions
nationwide. Private mortgage insurance plays an important role in the U.S. housing
finance system by protecting mortgage lenders and investors by mitigating default-related
losses on residential mortgage loans. These loans are made to home buyers who
generally make down payments of less than 20% of the home’s purchase price.
Private mortgage insurance promotes affordable home ownership by facilitating
the sale of these loans in the secondary mortgage market, most of which are
sold to the GSEs.
Defaulted loans that fail to become current, or “cure,” may result
in a claim under our mortgage insurance policies. Mortgage insurance claim volume
is influenced by the circumstances surrounding the default. The rate at which
defaults cure, or do not go to claim, depends in large part on a borrower’s
financial resources and circumstances (including whether the borrower is eligible
for a loan modification), local housing prices and housing supply (i.e., whether
borrowers are able to cure defaults by selling the property in full satisfaction
of all amounts due under the mortgage), interest rates and regional economic
conditions. In our first-lien primary insurance business, the insured lender
must acquire title to the property (typically through a foreclosure proceeding)
before submitting a claim. The time for a lender to acquire title to a property
through foreclosure varies depending on the state. Following the financial crisis,
the time between a default and a request for claim payment increased, largely
as a result of foreclosure delays due to, among other factors, increased scrutiny
within the mortgage servicing industry and foreclosure process. Delays in foreclosures
have continued to extend the timing of claim submissions, in particular as compared
to historical experience. For our pool insurance business, loans are insured
under policies separate from the Master Policies used in our primary mortgage
insurance business. Typically, our pool policies require the insured to not
only acquire title but also to actively market and ultimately liquidate the
real estate asset before filing a claim, which generally lengthens the time
between a default and a claim submission.
Our claims management process is focused on promptly analyzing and processing
claims to ensure that valid claims are paid in a timely and accurate manner.
In addition, our mortgage insurance claims management department pursues opportunities
to mitigate losses both before and after claims are received. We dedicate significant
resources to mortgage insurance claims management.
We have a dedicated loss mitigation group that works with servicers to identify
and pursue loss mitigation opportunities for loans in both our performing and
non-performing (defaulted) portfolios. This includes regular surveillance and
benchmarking of servicer performance with respect to default reporting, borrower
retention efforts, foreclosure alternatives and foreclosure processing. Through
this process, we seek to hold servicers accountable for their performance and
communicate to servicers identified best practices for servicer performance.
We evaluate and consider a number of factors that assess the quality of the
loan origination and the loan servicing in determining the extent of our loss
mitigation reviews and which loss mitigation strategies to pursue.
Our Services segment consists primarily of Clayton and provides services and
solutions to the real estate and mortgage finance industries, including outsourced
services, mortgage-related analytics and specialized consulting and surveillance
services for buyers and sellers of, and investors in, mortgage- and real estate-related
loans and securities as well as other ABS. Our Services segment provides information
and services that financial institutions, investors and government entities,
among others, use to evaluate, acquire, securitize, service and monitor loans
and ABS. The primary services offered are described further below and include:
loan review and due diligence; surveillance; valuation and component services
and REO management services; and services for the United Kingdom and European
mortgage markets offered through Clayton’s EuroRisk operations.
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