Responding to a recent drop in the company's stock price, mortgage insurer Radian Group Inc. said its financial strength is solid and its liquidity remains strong. The company said paid claims during the second quarter will be less than $230 million, below its previous guidance of $240 million, while first mortgage defaults in its portfolio declined by 9 percent during the quarter. Radian said it is now insuring mostly traditional, prime mortgages now, which it expects to generate profitability and long-term financial strength.
The company had steep price drop amid the turmoil of the mortgage and credit crisis. The stock price fell from $5.91 to $.77.
Fitch Ratings said on Friday it withdrew its ratings on Radian Group and its mortgage and bond insurers because Radian has not provided it with adequate information to maintain credible ratings.
Radian’s auditor, Deloitte & Touche LLP does not want to continue as the company’s auditor. Friedman Billings Ramsey expects that the stock will not be able to recover unless it finds a new auditor. This is because a new auditor may take a conservative approach while valuing Radian’s assets
The Federal Reserve lowered its benchmark interest for the first time in four years. This news led to an increase in the stock price of Radian Group by 11 percent, which is trading at 30 percent down this year. The Fed reduced the rate by 0.5 points to 4.75 percent, which was primarily done to help the mortgage lenders face the liquidity crisis in the present mortgage market.
Third Avenue Management increased its stake in Radian Group by four times to 11 percent. Radian Group’s stock price had declined by 67 percent in the last two months due to the housing slump. AIC Ltd. and D.E. Shaw & Co. had also increased their stake in Radian Group earlier.
MGIC Investment canceled its merger with Radian Group due to the prevailing crisis in the mortgage market. Also, MGIC said that Radian was hiding details related to businesses, which are vulnerable to this mortgage market crisis.
