In addition to reinsurance, we have insured certain transactions on a second-to-pay basis, meaning that we are obligated  to pay claims in respect of these transactions only to the extent that both the underlying obligation defaults and another insurer ,  who is the primary obligor for claims, fails to pay a valid claim. Consequently , if the conservator for an insolvent financial  guarantor rejects payment of all or a portion of a valid claim, we may be required to pay all or a portion of such valid claim.  Because many insurers are currently experiencing significant financial dif ficulties, the likelihood of our having to pay a claim  on our second-to-pay transactions, due to another insurer ’s failure to pay, has increased. In 2009, Syncora and FGIC suspended  all claims payments following orders by the NYSDFS. FGIC is currently in rehabilitation, and therefore, the timing and amount  of any claims payments from FGIC are uncertain and could result in additional claim payments by us on those transactions for  which FGIC is the primary insurer and we have insured on a second-to-pay basis.  While the NYSDFS lifted the suspension of  payments by Syncora in June 2010, Syncora has subsequently posted additional losses and it is possible the NYSDFS could  implement the suspension again in the future.  A rehabilitation proceeding for FGIC pursuant to  Article 74 of the New York  Insurance Law is currently pending before the Supreme Court of the State of New  York, and as a result, FGIC is currently only  permitted to pay 25% of the amount of any claims. In 2010,  Ambac placed a portion of its obligations into a segregated account  that is under the control of the  WOCI. We cannot provide any assurance whether or not the  WOCI will include any of our  second-to-pay obligations where Ambac is the primary insurer in the segregated account or otherwise limit  Ambac’s ability to  pay claims with respect to such transactions.  As of December 31, 2012, Syncora, FGIC and Ambac are the primary insurers on  $691.0 million net par outstanding (or 32.2%) of our second-to-pay exposure. $233.3 million (or 33.8%) of our second-to-pay  exposure with respect to these primary insurers is internally rated BIG. In order to maintain the highest level of eligibility with Freddie Mac and Fannie Mae, mortgage insurers have historically  been required to maintain an insurer financial strength rating of  AA- or Aa3 from at least two of the three ratings agencies by  which they are customarily rated. If a mortgage insurer were to lose such eligibility , Freddie Mac and/or Fannie Mae could  restrict the mortgage insurer from conducting certain types of business with them or take actions that may include not  purchasing loans insured by such mortgage insurer . In light of the most recent housing market downturn, both Freddie Mac and  Fannie Mae have indicated that loss of mortgage insurer eligibility due to such a downgrade will no longer be automatic and  will be subject to review if and when the downgrade occurs. Radian Guaranty has been downgraded substantially below these  required ratings. As a result, we have presented business and financial remediation plans to Freddie Mac and Fannie Mae for  how to restore profitability and ultimately regain a higher rating for our mortgage insurance business. If the rating agencies and  GSEs believe that our plans will not provide the capital required by our mortgage insurance business, or otherwise are not  satisfied, we could lose our eligibility with the GSEs and/or be further downgraded by the rating agencies.  We cannot be certain  whether, or for how long, either of the GSEs will continue to accept our existing remediation plans. In addition to ratings requirements, the current eligibility requirements impose limitations on the type of risk insured,  standards for the geographic and customer diversification of risk, procedures for claims handling, standards for acceptable  underwriting practices, standards for certain reinsurance cessions and financial requirements that generally mirror state  insurance regulatory requirements. The GSEs currently are in discussions with mortgage insurers regarding potential revisions  to the GSE standard mortgage insurer eligibility requirements, including certain changes that are more stringent than the current  requirements, such as imposing more onerous capital requirements than those that are currently in ef fect. We do not know  whether or when such modifications may be implemented or the form that any such modifications may take.  In February 2012, RMAI was approved to operate as an eligible insurer on a limited basis in certain states, subject to the  terms and conditions of the GSE  Approvals. The GSE Approvals are conditioned upon our compliance with a broad range of  conditions and restrictions, including without limitation, minimum capital and liquidity requirements, a maximum risk-to- capital ratio of 20 to 1 for RMAI, restrictions on payment of dividends and requirements governing the manner in which Radian  Guaranty and RMAI conduct af filiate transactions. There can be no assurance that we will be able to maintain compliance with  the requirements of the GSE Approvals or that the GSEs will not revoke their approvals. Failure by RMAI to maintain  compliance with the GSE Approvals could impact Radian Guaranty’ s eligibility status with the GSEs. We cannot be certain that Radian Guaranty and RMAI will be able to retain eligibility status with the GSEs. Loss of our  eligibility status with the GSEs would likely have an immediate and material adverse impact on the franchise value of our  mortgage insurance business and our future prospects and would negatively impact our results of operations and financial  condition.  We could lose our eligibility status with the GSEs, causing Freddie Mac and Fannie Mae to decide not to purchase  mortgages insured by us, which would significantly impair our mortgage insurance franchise.  69