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changes in general economic and political conditions, including high unemployment rates and continued weakness in the U.S. housing and mortgage credit markets, the U.S. economy reentering a recessionary period, a lack of meaningful liquidity in the capital markets or in the credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, each of which may be accelerated or intensified by, among other things, further actual or threatened downgrades of U.S. credit ratings;

•

changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers or financial guaranty providers, in particular in light of recent developments in the private mortgage insurance industry in which certain of our former competitors have ceased writing new mortgage insurance business and, in one case, has been placed under supervision or receivership by its insurance regulator;

•	catastrophic events or further economic changes in geographic regions, including governments and municipalities, where our mortgage insurance or financial guaranty insurance exposure is more concentrated;

•	our ability to successfully execute upon our capital plan for our mortgage insurance business (which depends, in part, on the performance of our financial guaranty portfolio), and if necessary, to obtain additional capital to support our mortgage insurance business and the long-term liquidity needs of our holding company;

•	a further reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, general reduced housing demand in the U.S., and the risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act");

•

our ability to maintain an adequate risk-to-capital position and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and potential further deterioration and losses in our financial guaranty portfolio which, in the absence of new capital, could depend on our ability to execute strategies for which regulatory and other approvals are required and may not be obtained (see Item 1A of Part II of this Quarterly Report on Form 10-Q);

•	our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;

•	the ability of our primary insurance customers in our financial guaranty reinsurance business to provide appropriate surveillance and to mitigate losses adequately with respect to our assumed insurance portfolio;

•	a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels (including as a result of successful challenges to previously rescinded policies or claim denials), which rescissions and denials have reduced our paid losses and resulted in a significant reduction in our loss reserves;

•	the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation;

•	the need, in the event that we are unsuccessful in defending our rescissions or denials, to increase our loss reserves for, and reassume risk on, rescinded or denied loans, and to pay additional claims;

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•	the concentration of our mortgage insurance business among a relatively small number of large customers;

•	any disruption in the servicing of mortgages covered by our insurance policies and poor servicer performance;

•	adverse changes in severity or frequency of losses associated with certain products that we formerly offered that are riskier than traditional mortgage insurance or financial guaranty insurance policies;

•	the performance of our insured portfolio of higher risk loans, such as Alternative-A and subprime loans, and of adjustable rate products, such as adjustable rate mortgages and interest-only mortgages;

•	a decrease in persistency rates of our mortgage insurance policies, which would reduce our premium income;

•	an increase in the risk profile of our existing mortgage insurance portfolio as refinancing of existing mortgage loans generally is available to only the most qualified borrowers in the current mortgage and housing market;

•

changes in the criteria for assigning credit or similar ratings, further downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time, including in particular, the credit ratings of Radian Group Inc. ("Radian Group") and the financial strength ratings assigned to Radian Guaranty Inc. ("Radian Guaranty");

•

heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Veteran's Administration and other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies that may have access to greater amounts of capital than we do, or new entrants to the industry that are not burdened by legacy obligations);

•	changes in the charters or business practices of, or rules or regulations applicable to, Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Fannie Mae and Freddie Mac;

•	changes to the current system or regulatory structure of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in scope;

•

the effect of the Dodd-Frank Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act and potential obligations to post collateral on our existing insured derivatives portfolio (see Item 1A of Part II of this Quarterly Report on Form 10-Q);

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the application of existing federal or state consumer, lending, insurance, tax, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the outcome of existing, or the possibility of additional, lawsuits or investigations; and (ii) legislative and regulatory changes (a) affecting demand for private mortgage insurance, including the possibility that the current federal tax deduction for mortgage insurance will not be extended beyond the expiration of the program on December 31, 2011, (b) limiting or restricting our use of (or increasing requirements for) additional capital and the products we may offer, or (c) affecting the form in which we execute credit protection or affecting our existing financial guaranty portfolio;

•	the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance or financial guaranty businesses or premium deficiencies for our mortgage insurance business, or to estimate accurately the fair value amounts of derivative instruments in determining gains and losses on these instruments;

•	volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including our derivative instruments, and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;

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•	our ability to realize the tax benefits associated with our gross deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;

•

our ability to successfully develop and implement a strategy to utilize the recently acquired Municipal and Infrastructure Assurance Corporation (the "FG Insurance Shell") in the public finance financial guaranty market, which strategy may depend on, among other items, our ability to obtain further necessary regulatory or other approvals, to attract third-party capital and to obtain ratings sufficient to support such a strategy;

•	changes in accounting guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board; and

•	legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries.

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•	Potential adverse effects of the failure or significant delay of the U.S. economy to fully recover from the most recent recession and prolonged economic downturn, including ongoing uncertainty in the housing and related credit markets and high unemployment, which could increase our mortgage insurance or financial guaranty losses beyond existing expectations. (See Notes 7, 8 and 9).

•	Our ability to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves or premium deficiency reserves for our mortgage insurance or financial guaranty businesses. (See Notes 7, 8 and 9).

•	Our ability to effectively manage our capital and liquidity, including:

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Potential adverse effects on us if the capital and liquidity levels of Radian Group or our regulated subsidiaries' statutory capital levels are deemed inadequate to support current business operations and strategies. Radian Group had immediately available, directly or through an unregulated direct subsidiary, unrestricted cash and liquid investments of $726.4 million at September 30, 2011, which includes $150 million of investments contained in our committed preferred custodial trust securities ("CPS"). (See Note 5 for additional information regarding CPS).

•

Potential adverse effects if Radian Guaranty's regulatory risk-based capital position fails to comply with applicable state statutory or regulatory risk-based capital requirements, including if its risk-to-capital ratio were to increase above 25 to 1, without obtaining waivers or similar relief from the states that impose such statutory or regulatory risk-based capital requirements. These risks include the possibility that: (i) insurance regulators or the GSEs may limit or cause Radian Guaranty to cease writing new mortgage insurance; (ii) the GSEs may terminate or otherwise restrict Radian Guaranty's eligibility to insure loans purchased by the GSEs; and (iii) Radian Guaranty's customers may decide not to insure loans with Radian Guaranty or may otherwise limit the type or amount of business done with Radian Guaranty. (See Note 13 for additional information regarding our statutory capital and Note 17 regarding a subsequent event).

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•

Factors adversely affecting Radian Group's capital and liquidity that could cause Radian Group to have insufficient sources of capital and liquidity to meet all of its expected obligations, including our failure to estimate accurately the likelihood and potential effects of the various risks and uncertainties described in this report, as well as potential regulatory, legal or other changes to our tax or expense allocation agreements among Radian Group and its subsidiaries. During October 2011, Radian Group paid approximately $84 million to Radian Guaranty and other subsidiaries within its consolidated group under its tax-sharing agreements.

•	Potential adverse effects from legislative efforts to reform the housing finance market, including the possibility that new federal legislation could reduce or eliminate the requirement for private mortgage insurance or place additional significant obligations or restrictions on mortgage insurers.

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Potential impact on our businesses as a result of the implementation of regulations under the Dodd-Frank Act, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act, and potential obligations to post collateral on our existing insured derivatives portfolio.

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(1)	Represents NIMS derivative assets related to consolidated NIMS VIEs. Also includes common stock warrants. Because none of these investments represent financial guaranty contracts that we issued, they cannot become liabilities, and therefore, do not represent additional par exposure.

(2)	Represents the fair value of an interest rate swap included in the consolidation of one of our financial guaranty transactions. The notional amount of the interest rate swap does not represent additional par exposure, and therefore, is excluded from this table. See Note 5 for information on our maximum exposure to loss from our consolidated financial guaranty transactions.

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(1)	Includes the net liability recorded within derivative assets and derivative liabilities, and the net liability recorded within VIE debt and other financial statement line items for consolidated VIEs.

(2)	Includes NIMS VIE debt and NIMS derivative assets.

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(1)	Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.

(2)	Comprising short-term commercial paper within CPS trusts ($150.0 million) and short-term CDs ($1.6 million) included within Level II, and lottery annuities ($1.7 million) and TruPs held by consolidated VIEs ($4.5 million) included within Level III.

(3)	Does not include fixed-maturities held to maturity ($4.1 million) and other invested assets ($62.4 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

(4)	Comprising manufactured housing loan collateral related to two consolidated financial guaranty VIEs.

(5)	Comprising consolidated debt related to NIMS VIEs ($31.2 million) and amounts related to financial guaranty VIEs ($242.2 million).

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(1)	Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.

(2)	Comprising short-term commercial paper within CPS trusts included within Level II, and lottery annuities ($2.6 million) and TruPs held by consolidated VIEs ($2.0 million) included within Level III.

(3)	Does not include fixed-maturities held to maturity ($10.8 million), certain short-term investments ($1.6 million), primarily invested in CDs and time deposits, and other invested assets ($59.6 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

(4)	Comprising manufactured housing loan collateral related to two consolidated financial guaranty VIEs.

(5)	Comprising consolidated debt related to NIMS VIEs ($141.0 million) and amounts related to financial guaranty VIEs ($379.1 million) that required consolidation as of January 1, 2010, under the accounting standard update regarding improvements to financial reporting by enterprises involving VIEs.

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(1)	Includes unrealized gains (losses) relating to assets and liabilities still held as of September 30, 2011, as follows: $(1.5) million for investments, $0.2 million for NIMS derivative assets, $(13.3) million for other assets, $117.1 million for derivative liabilities, and $92.3 million for VIE debt.

(2)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

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(1)	Includes unrealized gains (losses) relating to assets and liabilities still held as of September 30, 2011, as follows: $17.1 million for investments, $(1.8) million for NIMS derivative assets, $(1.3) million for other assets, $515.9 million for derivative liabilities, and $144.6 million for VIE debt.

(2)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

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(1)	Includes unrealized gains (losses) relating to assets and liabilities still held as of September 30, 2010, as follows: $1.5 million for investments, $(0.3) million for NIMS and CPS derivative assets, $0.3 million for other assets, $221.3 million for derivative liabilities, and $(4.1) million for VIE debt.

(2)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

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(1)	Represents the impact of our adoption of the accounting standard update regarding improvements to financial reporting by enterprises involving VIEs.

(2)	Includes unrealized gains (losses) relating to assets and liabilities still held as of September 30, 2010, as follows: $13.1 million for investments, $(0.7) million for NIMS and CPS derivative assets, $3.6 million for other assets, $(414.2) million for derivative liabilities, and $(28.6) million for VIE debt.

(3)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

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(1)	The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which include an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.

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(1)	The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which include an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.

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(1)	The maximum exposure is based on our carrying amounts of the investments.

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(1)	Activity displayed reflects the impact, for the periods prior to June 30, 2010, for one CPS custodial trust that was not consolidated prior to that date.

(1)	Comprising broadly diversified domestic equity mutual funds ($149.1 million fair value at September 30, 2011) and various preferred and common stocks invested across numerous companies and industries ($14.6 million fair value at September 30, 2011).

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(1)	Comprising broadly diversified domestic equity mutual funds ($168.4 million fair value at December 31, 2010) and various preferred and common stocks invested across numerous companies and industries ($16.0 million fair value at December 31, 2010).

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.

(2)	RMBS, CMBS and Other ABS are shown separately, as they are not due at a single maturity date.

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(1)	Related to ceded losses on captive reinsurance transactions and Smart Home. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements" for additional information regarding our Smart Home transactions.

(2)	Related to underlying defaulted loans with a most recent date of default notice in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

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(1)	Related to claims from policies in which we were in a first loss position and would have paid the claim absent the rescission or denial.

(2)	Related to claims from policies in which we were in a second loss position. These rescissions or denials may not have resulted in a claim payment obligation due to deductibles and other exposure limitations included in our policies.

(3)	Includes a small number of submitted claims that were subsequently withdrawn by the insured.

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(1)

Rescission/Denial rates represent the ratio of claims rescinded or denied to claims received (by claim count) and represent (as of September 30, 2011) the cumulative rate for each quarter based on number of claims received during that quarter. Until all of the claims received during the periods shown have been internally resolved, the rescission rates for each quarter will be subject to change. These rates also will remain subject to change based on reinstatements of previously rescinded policies or denied claims.

(2)

The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded, though such denials or rescissions could be challenged and, potentially reinstated. For the second and third quarters of 2011, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission rates for those periods are presently meaningful.

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(1)	During the second quarter of 2011, we liquidated a foreign financial guaranty subsidiary, which resulted in the recognition, through net income, of significant foreign currency translation gains that were previously included in other comprehensive income.

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•

Public Finance—Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states, counties, cities, special service districts, other political subdivisions, enterprises such as public and private higher education institutions and health care facilities and infrastructure, project finance and private finance initiative assets in sectors such as airports, education, healthcare and other infrastructure projects;

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Structured Finance—Insurance of structured finance obligations, including corporate collateralized debt obligations ("CDOs") and asset-backed securities ("ABS"), consisting of funded and non-funded (referred to herein as "synthetic") executions that are payable from or tied to the performance of a specific pool of assets or covered reference entities. Examples of the pools of assets that collateralize or underlie structured finance obligations include corporate loans, bonds or other borrowed money, residential and commercial mortgage loans, trust preferred securities ("TruPs"), diversified payment rights ("DPRs"), a variety of consumer loans, equipment receivables, real and personal property leases, or a combination of asset classes or securities backed by one or more of these pools of assets;

•	Reinsurance—Reinsurance of domestic and international public finance obligations, including those issued by sovereign and sub-sovereign entities, and structured finance obligations.

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•

Defaults.   Our first-lien primary default rate at September 30, 2011, was 15.2%, compared to 16.5% at December 31, 2010. Our primary default inventory comprised 110,740 loans at September 30, 2011, compared to 111,434 loans and 125,470 loans at June 30, 2011, and December 31, 2010, respectively. Our primary default inventory continued to decline slightly in October 2011. This positive trend in our 2011 default inventory is primarily because the combination of the number of cures, claim payments, and rescissions and denials have exceeded the number of new defaults. Despite this positive trend, our overall primary default rates continue to remain elevated due to continued high unemployment and weakness in the U.S. housing and mortgage credit markets. In addition, the magnitude of this positive trend has diminished in recent months as the number of new defaults remains elevated, while cures on existing defaults have been consistently low, resulting in limited, incremental improvement during the past few quarters. We believe that a return to sustained profitability in our mortgage insurance business is dependent upon both a further reduction in the number of new defaults and an increase in the number of cures, particularly coming from our older delinquent loans.

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•

Provision for Losses.   Our mortgage insurance provision for losses in the third quarter and first nine months of 2011 was $276.6 million and $960.6 million, respectively, and was primarily related to reserves established on new defaults that occurred in 2011. In addition, our provision for losses has been impacted by an increase in the weighted average rate at which defaulted loans are expected to move to claim (the "default to claim rate"), due to a greater than anticipated impact from the aging of underlying defaulted loans. With continuing declines in home values, persistently high unemployment and delays by servicers in either modifying loans or foreclosing on properties, the time it has taken to cure or otherwise resolve a delinquent loan has exceeded our expected timeframe. Consequently, in recent years, our default inventory has experienced an increase in its weighted average age, and we apply higher estimated default to claim rates on our more aged delinquent loans, resulting in higher reserves. Although the weighted average age of our defaulted portfolio continued to increase throughout the first nine months of 2011, the pace of this increase slowed in the second and third quarters of 2011, resulting in a smaller impact on incurred losses. Finally, our results for the first nine months of 2011 were also negatively impacted by an increase in our incurred but not recorded ("IBNR") reserve estimate in the first quarter of 2011 of $77.8 million, related to an increase in our estimate of future reinstatements of previously rescinded policies and denied claims.

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Claims paid.  Total mortgage insurance claims paid in the third quarter and first nine months of 2011 were $329.9 million and $1.2 billion, respectively. The claims paid for the first nine months of 2011 include $53.6 million related to claims paid in connection with the termination of certain structured mortgage insurance transactions. As discussed above, foreclosure backlogs, servicer delays and loan modification programs have reduced the number of defaults going to claim. In the third quarter of 2011, claims paid were also reduced by an increase in the number of claims received that we are reviewing for potential violations of our insurance policies, which has slowed our internal claims payment process. We cannot be certain of the ultimate impact of these programs on our business or results of operations, or the timing of this impact. Some of the most recent foreclosure backlogs, related to borrower challenges to allegations of improper foreclosure documentation, have further delayed our receipt of claims. We currently expect total claims paid in 2011 to be approximately $1.6 billion, and in 2012 to be approximately $1.3 billion.

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•

New Insurance Written.   We wrote $4.1 billion and $9.0 billion of new mortgage insurance in the third quarter and first nine months of 2011, respectively, compared to $3.2 billion and $7.8 billion of insurance written in the corresponding periods of 2010. The increase in the three and nine months ended September 30, 2011, compared to the corresponding periods of 2010, is mainly attributable to an increase in the penetration rate of private mortgage insurance in the overall insured mortgage market, as well as an increase in market share. While the private mortgage insurance industry has made some progress in recapturing business from the FHA, the FHA's market share remains historically high, and this competition with the FHA, in conjunction with other market factors identified above, is likely to continue to negatively affect the volume of our new insurance written (“NIW”). We have been more aggressively marketing our product offerings that favorably compete with the FHA in order to gain market share back from the FHA. In the second quarter of 2011, we implemented a series of changes to our underwriting guidelines and rates, including a more efficient underwriting process for conforming loans, lower borrower-paid rates and an expansion of our non-conforming “jumbo” loan program. Effective April 18, 2011, the FHA reduced its upfront mortgage insurance premium and increased its annual premium, and effective October 1, 2011, the maximum loan amounts that may be insured by the FHA in both the high cost and all other markets were reduced. While we cannot be certain of the impact that our recent program changes and the recent changes by the FHA will have on our new insurance written, we believe that these changes could allow us to be more competitive with the FHA and other private mortgage insurers than in the recent past. There can be no assurance that the lower FHA maximum loan amounts that became effective October 1, 2011, will not be increased in the future, and in that case, what impact it might have on our new insurance written.

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Risk-to-Capital. Under state insurance regulations, Radian Guaranty is required to maintain minimum surplus levels and, in certain states, a minimum amount of statutory capital relative to the level of risk in force, or “risk-to-capital.” Sixteen states (the risk-based capital or “RBC States”) currently have a statutory or regulatory risk-based capital requirement, the most common of which (imposed by 11 of the RBC States) is a requirement that a mortgage insurer's risk-to-capital ratio may not exceed 25 to 1. As a result of on-going incurred losses, Radian Guaranty's risk-to-capital ratio increased to 21.4 to 1 as of September 30, 2011, compared to 16.8 to 1 at December 31, 2010 and 17.2 to 1 at September 30, 2010. Based on our current projections, which are based on various assumptions that are subject to inherent uncertainty and require judgment by management, Radian Guaranty's risk-to-capital ratio is expected to continue to increase and, absent any future capital contributions from our holding company, exceed 25 to 1 in the near term. As discussed more fully in “Results of Operations—Financial Guaranty—Financial Guaranty Exposure Information” in this quarterly report on Form 10-Q, Radian Asset Assurance provides credit protection on a CDO of ABS transaction that experienced an interest shortfall in the fourth quarter of 2011 and, as a result, we currently expect to establish a statutory reserve for the transaction in the fourth quarter of 2011, which will negatively impact the risk-to-capital position of Radian Guaranty. We actively manage Radian Guaranty's risk-to-capital position in various ways, including: (1) through reinsurance arrangements with our subsidiaries; (2) by seeking opportunities to reduce our risk exposure through commutations or other negotiated transactions; and (3) by contributing additional capital from Radian Group to our mortgage insurance operations. Radian Group currently has unrestricted cash and liquid investments of approximately $600 million, which may be used to further support Radian Guaranty's risk-to-capital position. Depending on the extent of our future losses, the amount of capital contributions required for Radian Guaranty to remain in compliance with the risk-based capital requirements imposed by certain states could be substantial and could exceed amounts maintained at Radian Group. See "Risk Factors—Losses in our mortgage insurance business have reduced Radian Guaranty's statutory surplus and increased Radian Guaranty's risk-to-capital ratio; additional losses in our mortgage insurance portfolio or financial guaranty portfolio, without a corresponding increase in capital or capital relief could further negatively impact these ratios, which could limit Radian Guaranty's ability to write new insurance and increase restrictions and requirements placed on Radian Guaranty” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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•	Terminations. In 2009, we began pursuing opportunities to manage our legacy mortgage insurance portfolio and non-traditional mortgage insurance RIF through a series of commutations, transaction settlements and terminations, including the following transactions in 2011:

•	In February 2011, we exercised our option to terminate two of our four Smart Home transactions, which added approximately $41.0 million of RIF to our portfolio. There was minimal impact to our financial statements as a result of these terminations.

•	In order to mitigate future expected losses, during the first nine months of 2011, we purchased one NIMS bond that we insure with approximately $0.9 million face value, at a purchase price approximately equal to our fair value liability for such NIMS bond at the time of purchase.

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In April 2011, we paid approximately $39 million to terminate a structured transaction, comprising $45 million of pool insurance RIF. This transaction had the effect of reducing the number of pool insurance defaults by approximately 2,200 loans. This transaction resulted in approximately $6.5 million of pre-tax income in the second quarter of 2011, as a result of a difference between the amount paid and our existing loss reserves.

•	In June 2011, we paid approximately $16.6 million to terminate a second-lien transaction, resulting in a $29.1 million reduction in RIF. There was minimal net impact to our financial statements as a result of this termination, as the amount paid substantially offset the reduction to our reserves.

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Net Par Outstanding.   Our financial guaranty segment's net par outstanding was $71.9 billion as of September 30, 2011, compared to $78.8 billion at December 31, 2010. The reduction in net par outstanding was primarily due to: (i) counterparties exercising their early termination rights with respect to $2.2 billion in net par outstanding of six corporate CDO transactions and one TruPs CDO transaction; (ii) the April 2011 Reinsurance Commutation of $0.5 billion in net par outstanding; and (iii) the amortization or scheduled maturity of our insured portfolio and prepayments ("refundings") of public finance transactions. In light of our decision in 2008 to discontinue writing new financial guaranty business, we expect our net par outstanding will continue to decrease as our financial guaranty portfolio matures and as we seek to proactively reduce our financial guaranty net par outstanding.

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Credit Performance.   The overall credit quality of our financial guaranty insured portfolio improved during the first nine months of 2011. The percentage of internally rated AAA credits in our portfolio increased to 45.0% of our net par outstanding at September 30, 2011, from 43.0% at December 31, 2010. In addition, the percentage of below investment grade ("BIG") exposure declined to 5.5% as of September 30, 2011, from 6.2% as of December 31, 2010. This was primarily due to credit improvements in our insured corporate CDO and TruPs portfolios and the removal of $231.2 million of BIG exposure from our public finance portfolio as part of the April 2011 Reinsurance Commutation.

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Public Finance. Our public finance insured portfolio continues to experience some stress from the general economic downturn and slow economic recovery, and $32.5 million of public finance net par outstanding was downgraded to BIG during the third quarter of 2011. As of September 30, 2011, approximately 4.0% of our total financial guaranty segment's net par outstanding consisted of public finance credits rated BIG.

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Structured Finance. The credit performance of our structured finance portfolio continued to improve during the first nine months of 2011. The percentage of internally rated AAA credits in our structured finance portfolio increased to 79.8% at September 30, 2011, from 75.8% at December 31, 2010. We have seen stabilization and improved performance across many of the transactions in our directly insured TruPs CDO portfolio. Banks within these insured transactions continue to show improved performance, while insurance companies in these transactions remain generally stable. As a result of this trend, we have upgraded 15 of our 19 transactions during the nine months ended September 30, 2011 (including eight in the third quarter of 2011), three of which were upgraded from BIG to investment grade (including two in the third quarter of 2011). Our weighted average internal rating for our directly insured TruPs bonds improved to BB as of September 30, 2011, from B+ as of December 31, 2010, reflecting the improvement in observed TruPs performance and our updated internal views of the banking sector and future TruPs performance. See "Results of Operations—Financial Guaranty—Financial Guaranty Exposure Information" below for additional information regarding material changes in the credit performance of our insured TruPs CDO portfolio.

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(1)

Represents the present value of our estimated credit loss payments (net of estimated recoveries) for those transactions for which we currently anticipate paying net losses, calculated using a discount rate of approximately 2.3%, which represents our current investment yield. At a discount rate of 5%, our estimated credit loss payments would decrease by approximately $156.9 million to $232.3 million.

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(1)

For the nine months ended September 30, 2011 and 2010, the financial impact for each component has been recalculated on a year to date basis, such that the sum of the individual quarterly impacts within each respective year will not equal the recalculated impacts. For example, the impact from a loan that defaults in one quarter that then cures in the next quarter of the same year is not reflected within the year to date provision for losses, as the net impact is zero for the year to date period.

(2)

Represents the provision for losses attributable to loans that were in default as of the beginning of each period indicated, including: (a) the change in reserves for loans that were in default status (including pending claims) as of both the beginning and end of each period indicated, (b) the net impact to provision for losses from loans that were in default as of the beginning of each period indicated but were either a cure, a prepayment, a paid claim or a rescission or denial during the period indicated and (c) the impact to our IBNR reserve during the period related to changes in actual and estimated reinstatements of previously rescinded policies and denied claims.

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(1)	Related to claims from policies in which we were in a first loss position and would have paid the claim absent the rescission or denial.

(2)	Related to claims from policies in which we were in a second loss position. These rescissions or denials may not have resulted in a claim payment obligation due to deductibles and other exposure limitations included in our policies.

(3)	Includes a small number of submitted claims that were subsequently withdrawn by the insured.

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(1)

Rescission/Denial rates represent the ratio of claims rescinded or denied to claims received (by claim count) and represent (as of September 30, 2011) the cumulative rate for each quarter based on number of claims received during that quarter. Until all of the claims received during the periods shown have been internally resolved, the rescission rates for each quarter will be subject to change. These rates also will remain subject to change based on reinstatements of previously rescinded policies or denied claims.

(2)

The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded though such denials or rescissions could be challenged and, potentially reinstated. For the second and third quarters of 2011, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission rates for those periods are presently meaningful.

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(1)	FICO credit scoring model.

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(1)	Included in primary insurance amounts.

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(2)	Includes those charged to a deductible or captive.

(3)	Net of any previously rescinded policies or denied claims that were reinstated during the period. Such reinstated rescissions may ultimately result in a paid claim, while any previously denied claims are generally reviewed for possible rescission prior to any claim payment.

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(1)	Net of reinsurance recoveries.

(2)	Calculated without giving effect to the impact of terminations of captive reinsurance transactions and the terminations of first- and second-lien transactions.

(3)	Before reinsurance recoveries.

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(1)	Represents ceded losses on captive transactions and Smart Home. See "Off-Balance Sheet Arrangements" for additional information regarding our Smart Home transactions.

(2)	Does not include second-lien premium deficiency reserve ("PDR").

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(1)	Insurance in force ("IIF") on captives as a percentage of total IIF.

(2)	RIF on captives as a percentage of total insurance in force.

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(1)	Represents our exposure to the aggregate outstanding principal on insured obligations.

(2)	A claim liability is recorded on the balance sheet when there is evidence that deterioration has occurred and the net present value of our expected losses for a particular policy exceeds the unearned premium reserve for that policy. The claim liability reported is net of estimated salvage and subrogation, which may result in a net claim asset.

(3)	Represents either the net (asset) liability recorded within derivative assets or derivative liabilities for derivative contracts, or the net (asset) liability recorded within VIE debt and other financial statement line items for financial guaranty consolidated VIEs.

(4)	Legally defeased bond issuances where our financial guaranty policy is not extinguished, but cash or securities in an amount sufficient to pay remaining obligations under such bonds have been deposited in an escrow account for the benefit of the bond holders.

(5)	Represents other types of municipal obligations, including human service providers, second-to-pay international public finance, non-profit institutions, project finance accommodations and stadiums, none of which individually constitutes a material amount of our financial guaranty net par outstanding.

(6)

Includes $3.4 billion and $3.8 billion at September 30, 2011 and December 31, 2010, respectively, of international public finance insured obligations (which includes sovereign debt), of which $127.9 million and $118.0 million at September 30, 2011, and December 31, 2010, respectively, of such obligations were in five Stressed Eurozone Countries. We had no exposure to Ireland at either September 30, 2011, or December 31, 2010.

(7)	Represents other types of structured finance obligations, including DPRs, collateralized guaranteed investment contracts or letters of credit, foreign commercial assets and life insurance securitizations, none of which individually constitutes a material amount of our financial guaranty net par outstanding.

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We have provided credit protection on the senior-most tranche of a CDO of ABS transaction (the "CDO of ABS" or "Insured CDO") with $450.6 million net par outstanding at September 30, 2011. The underlying collateral consists predominantly of mezzanine tranches of mortgage-backed securities ("MBS”). As of September 30, 2011, $382.5 million (or 89.6%) of the underlying collateral was rated BIG by at least one rating agency, of which $265.9 million (or 62.3%) of the underlying collateral had defaulted. In October 2011, due to continued collateral deterioration, Standard & Poor's Rating Service ("S&P") lowered their rating on this transaction to D. The ratings on this transaction remain CC internally and Ca by Moody's Investor Service ("Moody's”).

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We have reinsured several primary financial guaranty insurers' obligations with respect to $227.6 million in net par outstanding at September 30, 2011, related to Jefferson County, Alabama (the "County”) sewer bonds (the "Obligations"). We began paying claims related to the Obligations in 2008, and have paid $20.8 million of claims, net of salvage, on this transaction through September 30, 2011. The County's sewer system operations have generated sufficient revenues since the beginning of 2009 to pay interest on its outstanding debt, as well as regularly scheduled annual installments of principal in February of 2010 and 2011, primarily due to historically low prevailing interest rates on the County's variable rate obligations. However, we believe a number of factors continue to adversely affect the performance of our insured obligations, including the County's highly leveraged capital position, the sub-par performance of the sewer facilities and the possibility that the County will be unable to generate sufficient revenues to make regularly scheduled payments of principal and interest on the Obligations if interest rates increase.

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We have provided direct credit protection on 15 directly insured senior bonds ("TruPs bonds") issued pursuant to TruPs CDOs. We provide credit protection on these TruPs bonds through 19 separate CDS contracts, meaning that with respect to four of the TruPs bonds we insure, we entered into two separate CDS contracts (each with a different counterparty) covering the same TruPs bond. Our total aggregate net par outstanding related to the TruPs bonds was $1,932.0 million as of September 30, 2011, which is an 8.8% decrease from December 31, 2010. Many issuers of the TruPs collateral underlying our insured obligations continue to be negatively affected by the most recent U.S. economic recession and slow recovery, and as a result, have defaulted on their obligation to pay interest on their TruPs or have voluntarily chosen to defer interest payments, which is permissible for up to five years. Recently, however, the cures of previous defaults or deferrals of interest payments on the TruPs collateral has outpaced initial defaults and/or deferrals. As of September 30, 2011, $1.1 billion of our net par outstanding to directly insured senior TruPs bonds was internally rated BIG. The fair value liability of our directly insured TruPs transactions, which are accounted for as derivatives, was $32.4 million as of September 30, 2011.

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(1)	Cash item.

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(1)	Moody's ratings outlook for Radian Group, Radian Guaranty, Radian Insurance and Radian Mortgage Assurance is currently Positive. Moody's ratings outlook for Radian Asset Assurance is currently Stable.

(2)	S&P's ratings outlook for Radian Group and all our rated insurance subsidiaries is currently Negative.

(3)	Ratings have been withdrawn.

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Level I	—    Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level II	—    Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and

Level III	—    Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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•	first, we define a tranche on the CDX index (defined below) that equates to the risk profile of our specific transaction (we refer to this tranche as an "equivalent-risk tranche");

•	second, we determine the fair premium amount on the equivalent-risk tranche for those market participants engaged in trading on the CDX index (we refer to each of these participants as a "typical market participant"); and

•	third, we adjust the fair premium amount for a typical market participant to account for the difference between the non-performance or default risk of a typical market participant and the non-performance or default risk of a financial guarantor of similar credit quality to us (in each case, we refer to the risk of non-performance as "non-performance risk").

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•	the extent and the duration of the decline in value;

•	the reasons for the decline in value (e.g., credit event, interest related or market fluctuations);

•	the financial position and access to capital of the issuer, including the current and future impact of any specific events; and

•	the financial condition, and near term prospects, of the issuer.

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•	implement new eligibility requirements for mortgage insurers and alter or liberalize underwriting standards on low-down-payment mortgages they purchase;

•	alter the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;

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•	require private mortgage insurers to perform activities intended to avoid or mitigate loss on insured mortgages that are in default;

•	establish the amount of loan level delivery fees (which result in higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance; and

•	influence a mortgage lender's selection of the mortgage insurer providing coverage.

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•	establishes the Bureau of Consumer Financial Protection to regulate the offering and provision of consumer financial products or services under federal law, including residential mortgages;

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requires securitizers to retain at least 5% of the economic risk associated with mortgage loans that they cause to be securitized, unless the mortgage loans are "qualified residential mortgages" ("QRMs"), are insured by the FHA or guaranteed by the Veterans' Administration ("VA") or another federal agency or fall within another exception. In certain circumstances, the securitizers may elect to allocate a portion of this risk retention to willing originators. The Dodd-Frank Act provides that the definition of QRMs will be determined by regulators, with consideration to be given, among other things, to the presence of mortgage insurance, to the extent that the presence of mortgage insurance reduces the risk of default. On March 29, 2011, federal regulators issued the proposed risk retention rule that includes a definition of QRM. Among other requirements, the proposed rule excludes loans with non-traditional features, such as negative amortization loans, and required adherence to strict, objective underwriting standards, including a maximum LTV of 80% on a home purchase transaction, regardless of whether mortgage insurance is present, maximum debt-to-income ratios and borrower credit history restrictions. The proposed rule was subject to a public comment period that ended August 1, 2011. The regulators sought comments on virtually all aspects of the QRM definition, including: (1) a request for historical loan data that the regulators may use to assess whether loans with mortgage insurance are less likely to default than loans without mortgage insurance, (2) if the QRM definition included mortgage insurance, what financial eligibility standards should be incorporated for mortgage insurance providers and how might those standards be monitored and enforced, and (3) the potential benefits and costs of the alternative QRM definition that would give credit to mortgage insurance.

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may impose additional reporting, capital and collateral requirements on our financial guaranty business, including potentially, the posting of collateral for existing derivative contracts. On April 28, 2011, the Commodities Future Trading Commission ("CFTC") published in the Federal Register its proposed rule regarding margin for uncleared swaps entered into by swap dealers or major swap participants. Under this proposal, the rules would apply to uncleared swaps entered into only after the effective date of the regulation. Thus, the proposed requirements would not apply retroactively. Comments on this proposal were due on July 22nd. The CFTC has not yet released its final rules regarding capital requirements for swap dealers and major swap participants. Until these rules are finalized, we cannot provide assurance that these requirements will not be applied retroactively to our existing derivative contracts, which if so applied, would likely require that we post significant collateral amounts that could exceed our current investment balances, and consequently, could have a material adverse effect on our businesses and on our financial condition, including significantly reducing or eliminating the ability of our financial guaranty business to provide dividends to our mortgage insurance business;

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sets new limitations and restrictions on banking, derivatives and asset-backed securities that may make it more difficult for us to commute, restructure, hedge or otherwise mitigate losses or reduce exposure on our existing financial guaranty portfolio. In addition, proposed definitions of insurance contracts may not exempt certain financial guaranty policies from the provisions of the derivatives rules of the Dodd-Frank Act, which could adversely affect the ability of the FG Insurance Shell to write certain types of policies historically written by financial guaranty municipal bond insurers, or the ability of issuers of our insured bonds to restructure outstanding transactions; and

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establishes a Financial Stability Oversight Council, which is authorized to subject nonbank financial companies deemed systemically significant to more rigorous prudential standards and other requirements and to subject such companies to a special liquidation process outside the federal bankruptcy code, administered by the Federal Deposit Insurance Corporation ("FDIC") (although insurance company subsidiaries would remain subject to liquidation and rehabilitation proceedings under state law). In addition, the Dodd-Frank Act establishes a Federal Insurance Office within the Department of the Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office will perform various functions with respect to insurance, including serving as a non-voting member of the Financial Stability Oversight Council and making recommendations to the Council regarding insurers to be designated for more stringent regulation. The director is also required to conduct a study on how to modernize and improve the system of insurance regulation in the United States, including by increased national uniformity through either a federal charter or effective action by the states.

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