Private mortgage insurer MGIC Investment Corp. (MTG) said Wednesday it has reached a preliminary deal with Freddie Mac (FMCC.OB) to settle a pool insurance dispute with the latter.
The settlement involves payments that MGIC will make to Freddie Mac over a period of four years.
However, MGIC and Freddie Mac still must agree to certain issues that are significant to final resolution of the matter.
All terms of the settlement will be included in a definitive settlement agreement, which MGIC, Freddie Mac and Federal Housing Finance Agency, or FHFA, are negotiating. The agreement will be subject to approval by the Boards of MGIC and Freddie Mac, as well as by FHFA.
If both companies' Boards and FHFA approve a final settlement agreement, any definitive deal would only be signed concurrently with the satisfaction of the other conditions set by Freddie Mac.
These include (1) by December 1, 2012, MTG must contribute $100 million to MGIC, and (2) by December 31, 2012, the Office of the Commissioner of Insurance of Wisconsin must provide confirmation to Freddie Mac of the availability of the capital of MGIC Indemnity Corp., an unit of MGIC, to pay claims on MGIC policies.
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