Mortgage insurer MGIC Investment Corp. has sued mortgage financier Freddie Mac and the Federal Housing Finance Administration to settle a dispute over coverage limits on certain insurance policies.
MGIC said on Thursday it filed the suit in federal court in Wisconsin. The disagreement has been going on for some time, and centers on loss limits on policies that insure Freddie Mac, the No. 2 provider of U.S. mortgage money.
MGIC said in April that it believes the loss limit decreases as policies lapse, while Freddie asserts that the initial limit remains in place until the last of the policies expires.
The difference in the two interpretations, the company said, is about $535 million. Had MGIC used Freddie Mac’s interpretation when calculating its results, the company said its losses would have more than tripled in the first quarter.
A Freddie Mac spokeswoman was not immediately available to comment. In a statement, MGIC said it was open to resolving the dispute out of court and that it intended to keep working with Freddie Mac on other matters outside of the court case.
Shares in MGIC fell 9 percent to $2.33 in late trading, their lowest level in about six months.
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