Radian Mortgage Capital, our mortgage conduit subsidiary, acquires residential mortgage loans with the intention of then either selling the loans directly to mortgage investors, including the GSEs, or distributing them into the capital markets through private label securitizations, with the option to retain and manage certain components of the underlying credit risk.

During the aggregation period following loan acquisition, we carry these loans as residential mortgage loans held for sale until the loan is either sold or securitized. Net gains (losses) associated with these residential mortgage loans held for sale and any related hedges are included in net gains (losses) on investments and other financial instruments in our condensed consolidated statements of operations. Interest income on these residential mortgage loans held for sale is included in net investment income, while interest expense on mortgage loan financing facilities is reported in interest expense.

For those loans that are ultimately contributed to a securitization, we perform an analysis of our ongoing participation and rights in the securitization to determine if we need to consolidate the securitization trust. If we conclude that we are required to consolidate the securitization trust and continue to reflect those securitized mortgage loans on our condensed consolidated balance sheets, we then reclassify those loans as securitized residential mortgage loans held for investment, and record the prospective change in fair value and interest income and expense as total income (loss) on VIEs, as described further below.

The carrying value of our residential mortgage loans held for sale owned by Radian Mortgage Capital totaled $279 million and $520 million at March 31, 2025, and December 31, 2024, respectively, and is based on fair value. The estimated fair value of our residential mortgage loans held for sale is subject to, among other things, changes in mortgage interest rates from the date we agree to purchase the mortgage loan through the date we agree to sell the mortgage loan. In an effort to mitigate this interest rate risk, we enter into certain derivative contracts with third parties during the period from the commitment to purchase the mortgage loans until the loans are either securitized or sold directly to mortgage investors. We elected the fair value option for our residential mortgage loans held for sale to allow for consistent treatment of both mortgage loans and any associated hedges or derivatives.

As of March 31, 2025, our residential mortgage loans held for sale consisted of 453 mortgage loans with a total unpaid principal balance of $274 million, related to properties in 40 states and the District of Columbia. As measured by the unpaid principal balance as of March 31, 2025, 94% of these loans were originated in the past six months, including 56% that were originated in the first quarter of 2025. Loans on properties in California accounted for 18% of this balance, with no other state concentration exceeding 10% as of March 31, 2025. The majority of our loans are non-agency loans, with balances in excess of the GSEs’ conforming loan limits and with credit risk characteristics commensurate with the prime jumbo private label securitization market. As of March 31, 2025, none of these mortgage loans were greater than ninety days delinquent or in nonaccrual status.

Further, as of March 31, 2025, the Company had commitments to purchase and fund additional recently originated mortgage loans with a total unpaid principal balance of $366 million. Prior to the settlement and funding of these loan purchases, any unrealized net gains (losses) related to these commitments are recorded as derivative assets or liabilities on our condensed consolidated balance sheets, with the corresponding gain or loss included in net gains (losses) on investments and other financial instruments in our condensed consolidated statements of operations.

The following table reflects the outstanding derivative instruments related to our mortgage loan activity as of the dates indicated.


Derivative instruments


	March 31, 2025						December 31, 2024
			Fair Value						Fair Value
(In thousands)	Notional (1)		Derivative Assets		Derivative Liabilities		Notional (1)		Derivative Assets		Derivative Liabilities


Forward mortgage loan purchase commitments	$	366,176	$	1,400	$	—	$	51,732	$	65	$	—
Hedging instruments (2)
Forward RMBS purchase contracts	$	318,000	$	856	$	108	$	394,000	$	2,492	$	40
Interest rate swap futures contracts		57,000		1,286		—		58,500		1,717		—

(1)

Notional amounts provide an indication of the volume of the Company’s derivative capacity. For our hedging instruments, the notional amount is the face amount of our contracts and does not represent our exposure to credit loss and therefore is not reflected on our condensed consolidated balance sheets.

(2)

All of the derivatives used for hedging purposes are interest rate derivatives subject to master netting agreements and are considered economic hedges.

The impact to net gains (losses) on investments and other financial instruments from our residential mortgage loans held for sale and related hedging activities is as follows.


Net gains (losses) on residential mortgage loans held for sale, net of hedging activities


	Three Months Ended March 31,

(In thousands)	2025			2024

Net realized gains (losses) on residential mortgage loans held for sale
Mortgage loans held for sale (1)	$	(5,982	)	$	63
Mortgage servicing and other related rights resulting from residential mortgage loan sales		1,543			310
Total realized gains (losses) on residential mortgage loans held for sale		(4,439	)		373
Change in unrealized gains (losses) on residential mortgage loans sold		5,328			(1,097	)
Unrealized gains (losses) on residential mortgage loans held for sale still held (2)		4,208			1,078
Total net gains (losses) on residential mortgage loans held for sale		5,097			354
Net gains (losses) on mortgage loans held for sale hedging activities		(3,810	)		30
Net gains (losses) on residential mortgage loans held for sale, net of hedging activities	$	1,287		$	384

(1)

Includes net gains (losses) on residential mortgage loans held for sale through the date of transfer to a securitization trust, if applicable. See “Securitized Residential Mortgage Loans Held for Investment” below for information on subsequent gains (losses) for those securitized loans.

(2)

Includes net gains (losses) on mortgage loan commitments accounted for as derivatives prior to settlement.

We primarily fund the purchases of our residential mortgage loans held for sale with amounts borrowed under our mortgage loan financing facilities. See Note 12 for additional information on these facilities and their related terms and covenants.

Net investment income earned on our residential mortgage loans held for sale and interest expense incurred on our mortgage loan financing facilities consists of the following.


Net interest on residential mortgage loans held for sale


	Three Months Ended March 31,

(In thousands)	2025			2024


Interest income	$	6,273		$	1,793
Interest expense		(6,010	)		(1,438	)
Net interest on residential mortgage loans held for sale	$	263		$	355

In addition to the debt covenants under its financing facilities, Radian Mortgage Capital is also subject to certain requirements established by state and other regulators and loan purchasers, including Freddie Mac, such as certain minimum net worth and capital requirements and ratios. As of March 31, 2025, the most restrictive of these financial conditions required Radian Mortgage Capital to maintain a ratio of tangible net worth to total assets of at least 6%. As of March 31, 2025, Radian Mortgage Capital’s tangible net worth was $89 million, compared to a required minimum tangible net worth of $20 million based on this ratio. Changes in the fair value of residential mortgage loans held for sale and related hedges could materially impact Radian Mortgage Capital’s net worth in future periods. To the extent any capital requirements are not met, regulators and loan purchasers may exercise certain remedies, which may include, as applicable, prohibiting Radian Mortgage Capital from purchasing, selling, or servicing loans. As of March 31, 2025, Radian Mortgage Capital was in compliance with all such requirements.

During the first quarter of 2025, Radian Mortgage Capital closed on its third private label prime jumbo securitization transaction. The securitization involved the transfer of a portfolio of residential mortgage loans to a newly created special purpose vehicle, Radian Mortgage Capital Trust (“RMCT”) 2025-J1, and the private offering and issuance of $368 million of unregistered mortgage pass-through certificates collateralized by the cash flows of the underlying residential mortgage loans. At the closing of this transaction, we retained an interest in certain of the certificates, as we did at the closing of each of the two securitizations executed in 2024, and Radian Mortgage Capital and its affiliates (excluding its mortgage insurance affiliates) may hold an interest in the certificates from time to time. Because these securitizations consist entirely of qualified mortgages as defined in the Dodd-Frank Act, pursuant to applicable federal securities laws and regulations, Radian Mortgage Capital is not obligated to retain these certificates for a minimum length of time as part of any risk retention requirements.

We concluded that the special purpose vehicles created to facilitate these three securitization transactions are VIEs, primarily due to the minimal equity that the securitization trusts hold to be able to finance their activities without additional support. In addition to being the sponsor and depositor for the trusts, our involvement with these VIEs is ongoing and includes retaining the subordinate certificates that are in a first loss position and maintaining certain discretionary rights associated with those subordinate investments, including certain rights to direct the loss mitigation activities of the servicer. As a result of our having both: (i) the economic obligation to absorb losses and receive benefits that could be significant to each VIE and (ii) the power to direct the activities that most significantly impact the performance of the VIE, we concluded that we are the primary beneficiary of these VIEs. As a result, we consolidate the assets, liabilities, operations and cash flows of the securitization trusts on our condensed consolidated financial statements. Since we were already carrying the loans transferred to the trusts at fair value prior to the securitization, consistent with our policy election for all residential mortgage loans held for sale, we did not recognize any material gain or loss upon consolidation of these VIEs.

Despite being the primary beneficiary of the VIEs and consolidating the trusts’ activities, the holders of the securitized debt have no recourse to the general credit of Radian and we neither own nor are liable for the assets and liabilities of the VIEs. Rather, our exposure to these trusts is primarily through the risk of loss on the interests we have retained, as well as the obligation, under certain circumstances, for Radian Mortgage Capital to repurchase assets from the VIEs upon the breach of certain representations and warranties with respect to the residential mortgage loans transferred to the VIEs. Furthermore, liquidity available at the consolidated VIEs is not available for corporate liquidity needs, other than through distributions on the certificates we have retained.

We have elected the fair value option for the initial and subsequent recognition of the securitized residential mortgage loans and the related liabilities issued by the consolidated VIEs. Electing this option allows us to record changes in fair value in the condensed consolidated statement of operations, which, in management’s view, appropriately reflects the results of operations for a particular reporting period as all activities will be recorded in a comparable manner.

As a result of this fair value election, we report both the assets and liabilities of each consolidated VIE at fair value, including reporting the VIE’s mortgage loans in securitized residential mortgage loans held for investment and the asset-backed securities issued by the VIE in securitized nonrecourse debt. We eliminate from this debt the value of the certificates that we retained. As of March 31, 2025, the net reported value of the consolidated VIE assets and liabilities was $25 million, which represents the aggregate fair value of our retained interests from the VIE, including accrued interest, as of that date.

The following table details the components of our consolidated VIE assets and liabilities by securitization as of the dates indicated.


Consolidated VIE assets and liabilities


(In thousands)		March 31, 2025						December 31, 2024
VIE	Closing Date	Consolidated VIE Assets		Consolidated VIE Liabilities		Net Retained Interest		Consolidated VIE Assets		Consolidated VIE Liabilities		Net Retained Interest


RMCT 2024-J1	July 2024	$	312,014	$	305,534	$	6,480	$	317,782	$	311,751	$	6,031
RMCT 2024-J2	October 2024		380,429		374,146		6,283		403,525		397,844		5,681
RMCT 2025-J1	February 2025		372,098		360,035		12,063		—		—		—
Total		$	1,064,541	$	1,039,715	$	24,826	$	721,307	$	709,595	$	11,712

We report the net financial results from consolidated VIEs in income (loss) on consolidated VIEs in our condensed consolidated statements of operations, which also equals the income (loss) from our retained interests in any given period, based on the interest income and change in fair value for those interests. As of March 31, 2025, none of the loans in the securitization trust were greater than ninety days delinquent or in nonaccrual status.

The following table details the components of income (loss) on consolidated VIEs for the three months ended March 31, 2025. There was no activity for the three months ended March 31, 2024.


Income (loss) on consolidated VIEs


	Three Months Ended March 31,

(In thousands)	2025


Net change in fair value of VIE assets and liabilities reported under the fair value option	$	(313	)
Interest income		14,859
Interest expense		(13,569	)
Other expenses		(549	)
Total income (loss) on consolidated VIEs	$	428

As part of our overall business strategy, we expect to continue to expand Radian Mortgage Capital’s use of securitizations in the future. It is possible that we may consolidate additional VIEs in future periods, depending on the facts and circumstances regarding our involvement with each VIE. We continuously analyze entities in which we hold variable interests, including when there is a reconsideration event, to determine whether our consolidation conclusions regarding any VIE should change.