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Regulatory Watch: Risk Based Capital Rules May Aid Two Triple-A Rated Insurance Firms.
Two mortgage insurance firms, GE Capital Mortgage Insurance and United Guaranty, appear to be "winners" in the wake of new risk-based capital rules for Fannie Mae and Freddie Mac. Then again, maybe not.
Industry officials, including MI executives, lenders and stock analysts, say it is too early to tell which outside "counter-parties" that engage in transactions with the GSEs will be hurt by the new risk rules.
Among others, the rule affects not only the MIs, but seller-servicers and players in the MBS market.
The early thinking is that the only two MI firms with AAA credit - GECMI and UGI - stand to benefit because the new rules force the GSEs to take a financial "haircut" if they do business with AA firms, which would include five of the seven MIs.
"The irony of the situation is great," said one former MI official familiar with the matter.
UGI's chairman, Charles Reid, and GECMI's chief executive, Thomas Mann, are both members of FM Watch's executive committee. FM Watch's mission is to check Fannie and Freddie's expansion into what it feels are non-core mission activities. It is no secret in the industry that there is a certain amount of bad blood between GECMI, UGI and the two GSEs.
GECMI declined to comment for this article. UGI's Mr. Reid would only say that, "I have great respect for the differential between an AAA rating and an AA rating," adding that, "I also have great respect for all of our competitors."
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