PMI Group unit gets approval from Freddie Mac to issue mortgage guaranty insurance

PMI Group gets Freddie Mac’s OK to write policies

WALNUT CREEK, Calif. — The PMI Group Inc. on Tuesday said its main subsidiary received approval from Freddie Mac to be a direct issuer of mortgage guaranty insurance. Its shares climbed almost 17 percent.

The unit, PMI Mortgage Assurance Co., got Freddie Mac’s approval to write new mortgage insurance in certain states if the parent company cannot do so, because it can’t meet regulatory capital requirements. Regulations have tightened in some states in an effort to keep mortgage insurers from taking on too much risk.

Mortgage guaranty insurance is purchased by a lender to provide coverage in case a borrower fails, to meet required mortgage payments. The surge in foreclosures in recent years has dealt a blow to the industry and left several companies with depleted reserves.

The approval will remain in effect until Dec. 31, 2011.

PMI Group shares climbed 53 cents, or 16.9 percent, to $3.67 in late morning trading. The stock, which traded around $50 per share before the economic downturn, has ranged between 60 cents and $4.96 in the past 52 weeks.