Risk & Compliance

SEC Fishes for Info on Mortgage Insurers

It’s looking into the failed merger between MGIC and Radian Group and their joint investment in C-BASS, a subprime-mortgage investor.
Stephen TaubNovember 21, 2007

The Securities and Exchange Commission is investigating two mortgage insurers regarding their joint investment in Credit-Based Asset Servicing and Securitization (C-BASS), a troubled investor in subprime mortgages.

MGIC Investment Corp. said in a regulatory filing that the SEC requested documents and information relating to C-BASS, the company’s now-terminated proposal to merge with Radian Group, and its subprime mortgage assets.

The SEC is also investigating Radian, that company revealed in its own filing. “We believe that the investigation generally relates to our proposed merger with MGIC and our investment in C-BASS,” the company said. According to Radian, the SEC assured it that the investigation should not be construed as an indication that any violation of securities laws has occurred.

C-BASS is an issuer, servicer, and investor in credit-sensitive residential-mortgage assets. It is capitalized by MGIC, Radian, and C-BASS management. In late July, C-BASS disclosed it was subject to “an unprecedented amount” of margin calls due to the disruption in the credit markets. It added that it was working with a number of investors to facilitate not only an immediate resolution of its liquidity challenge but also a long-term partnership “that will better position the company.”

C-BASS announced in early August that it had retained The Blackstone Group as a financial adviser to help it obtain capital.