Freddie Seeks MI Remediation Plans.

McLean, VA -- Freddie Mac has ordered three more private mortgage insurers to come up with remediation plans following a downgrade by Standard & Poor's.

S&P downgraded the financial strength ratings on the mortgage insurance subsidiaries of MGIC Investment Corp., Milwaukee, and Radian Group Inc., Philadelphia, from AA- to A; The PMI Group Inc., Walnut Creek, Calif., from AA to A+; and Old Republic Corp., Chicago, from AA to AA-.

All but Old Republic, whose mortgage insurance subsidiary does business as Republic Mortgage Insurance Co., were ordered by Freddie Mac to develop remediation plans to maintain their status as Type I mortgage insurers. Back in February Freddie Mac implemented a new policy, which no longer automatically shifted Type I MIs to Type II when they received a downgrade.

Previously Triad Guaranty Inc. was ordered to come up with a remediation plan after Fitch (followed by Moody's and S&P) downgraded the financial strength rating to BBB.

A Freddie Mac spokesman said the downgrade on RMIC did not go through the AA- floor for Type I status and so its parent does not have to come up with a remediation plan.

The S&P report noted that more than 58% of the industry's flow market share in 2007 was written by companies whose financial strength ratings are below AA- and the other mortgage insurers (RMIC, Genworth and AIG United Guaranty) do not have the capital to absorb all the volume.

"The downgrades reflect weaker-than-expected results for the fourth quarter of 2007 and the continued deterioration in key variables that influence claims for mortgage insurance," explained S&P credit analyst James Brender.