4.  Underwriting Loans are underwritten to determine whether they are eligible for our mortgage insurance.  We perform this function  directly or, alternatively, we delegate to our customers the ability to underwrite the loans based on agreed-upon underwriting  guidelines. Delegated Underwriting . Through our delegated underwriting program, certain customers that have been approved by us,  are able to underwrite loans based on agreed-upon underwriting guidelines. Our delegated underwriting program currently  involves only lenders that are approved by our risk management group. Delegated underwriting allows our customers to  commit us to insure loans meeting agreed-upon guidelines.  This enables us to meet lenders’ demands for immediate insurance  coverage. With delegated underwriting, because the underwriting is being performed by third parties, we have additional rights  to rescind coverage if there is a deviation from our agreed-upon underwriting guidelines.  Additionally, any fraud or  misrepresentation in the loan origination process would provide us with rights to rescind coverage. During the second quarter of  2012, we began offering a limited rescission waiver program for our delegated underwriting customers, in which we agree not  to rescind coverage due to non-compliance with our agreed-upon underwriting guidelines so long as the borrower makes 36  consecutive payments (commencing with the initial required payment) from his or her own funds.  As part of this program, we  may require that some or all of the loans underwritten through the program be evaluated under an approved fraud model as part  of the origination process. This program does not restrict our rights to rescind coverage in the event of fraud or  misrepresentation in the origination of the loans we insure.  As of December 31, 2012, approximately 79% of our primary first- lien insurance in force had been originated on a delegated basis, compared to  83% as of December 31, 2011. See “Risk Factors — Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims. ” Non-Delegated Underwriting . Lenders that either do not qualify for or choose not to participate in our delegated  underwriting program can submit loan files to us and we will perform the underwriting. In addition, lenders participating in our  delegated underwriting program may choose not to use their delegated authority , and instead may submit loans directly to us.  For those loans underwritten by us, we generally do not have the same rescission remedies for breach of representations or  warranties that we do with respect to delegated underwriting.  We mitigate the risk of employee underwriting error through  quality control sampling and performance monitoring.  As of December 31, 2012, approximately 21% of our total first-lien  insurance in force had been originated on a non-delegated basis, compared to  17% as of December 31, 2011. Contract Underwriting.   In our mortgage insurance business, we also have a contract underwriting program through  which we provide an outsourced underwriting service to our customers. For a fee, we underwrite our customers’  loan files for  secondary market compliance (e.g., for sale to the GSEs), and may concurrently assess the file for mortgage insurance. During  2012, loans underwritten through contract underwriting accounted for  5.0% of insurance certificates issued as part of our flow  business. These loans are included within the non-delegated underwriting percentages discussed above. Typically, we agree that if we make a material error in underwriting a loan, we will provide a remedy to the customer by  purchasing the loan, by placing additional mortgage insurance on the loan or by indemnifying the customer against loss up to a  maximum specified amount. During 2012, we paid losses related to these remedies of approximately  $8.0 million. Beginning in  2008, we limited the recourse available to our contract underwriting customers to apply only to those loans that we are  simultaneously underwriting for compliance with secondary market compliance and for potential mortgage insurance.  We  monitor this risk and negotiate our underwriting fee structure and recourse agreements on a client-by-client basis.  We also  routinely audit the performance of our contract underwriters. B.  Direct Risk in Force  Our business traditionally has involved taking credit risk in various forms across a range of asset classes, products and  geographies. Credit risk is measured in our mortgage insurance business as RIF , which approximates the maximum loss  exposure that we have at any point in time. 10