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Monday, August 11, 2008

Radian Projecting 23% Claim Rate for Alt-A and Subprime

by Calculated Risk on 8/11/2008 11:06:00 AM

From the Radian conference call: (hat tip Brian)

This loss projection translates to an overall claim frequency of 10% on existing prime business and approximately 23% on our ALT-A /subprime business for an overall claim rate of about 14%. In other words we are projecting that approximately 14% of all the first lien loans on our book current and delinquent will ultimately become a claim. Even if losses are significantly higher than these projected levels we believe Radian has more than enough claims resources to pay all claims.
Here is the press release: Radian Reports Second Quarter Financial Results and Announces Capital Plan

Like last quarter, most of the problems are in California, Florida and Arizona. There was also quite a bit of discussion of "successful" loss mitigation, suggesting Radian is pushing back certain loans to the originators.

Last quarter Radian provided their estimate of house price declines:
"We estimate the peak to trough national price declines in a range between 8-13% using the OFHEO index. That would be in line with the Case Shiller approximated range of 16-26%. We could clearly see declines in areas of California and Florida that are twice the national rate.”
I've been listening to the call, and so far I haven't heard any update to these projections.