Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) Mortgage Insurance 179 We do not establish reserves for loans that are in default if we believe that we will not be liable for the payment of a  claim with respect to that default. For example, for those defaults in which we are in a  “second loss position” (i.e., we are not  required to make a payment until a certain aggregate amount of losses have already been recognized on a given set of loans),  we initially calculate the reserve for defaulted loans in the transaction as if there were no deductible. If the existing deductible  for a given structured transaction is greater than the reserve amount for the defaults contained within the transaction, we do not  establish a reserve for the defaults, or if appropriate, we record a partial reserve.  We do not establish loss reserves for expected  future claims on insured mortgages that are not in default. See “ Reserve for Premium Deficiency ” below for an exception to this  general principle. We also establish reserves for defaults that we estimate have been incurred but have not been reported  (“IBNR”) to us on  a timely basis by the servicer and for defaults related to previously rescinded policies and denied claims, which we estimate  will be reinstated and subsequently paid. We generally give the insured up to 90 days to rebut our decision to rescind coverage  before we consider a policy to be rescinded and remove it from our default inventory; therefore, we currently expect only a  limited percentage of policies that were rescinded to be reinstated.  We currently expect a significant percentage of claims that  were denied to ultimately be resubmitted as a perfected claim and paid. Most often, a claim denial is the result of the servicer ’s  inability to provide the loan origination file or other servicing documents for review . Under the terms of our master insurance  policy with our lending customers, our insureds have up to one year after the acquisition of borrower ’s title to provide to us the  necessary documents to perfect a claim.  All estimates are periodically reviewed and adjustments are made as they become  necessary.  With respect to loans that are in default, considerable judgment is exercised as to the adequacy of reserve levels. Loss  reserves are increased as defaulted loans age, because they are considered to be closer to foreclosure and more likely to result  in a claim payment. In the past, as the default proceeded towards foreclosure, there was generally more certainty around these  estimates. However, in the current environment in which many foreclosures have been delayed, significant uncertainty remains  with respect to the ultimate resolution of aged defaults.  This uncertainty requires management to use considerable judgment in  estimating the rate at which these loans will result in claims. If a default cures, the reserve for that loan is removed from the  reserve for losses and LAE.  In the mortgage insurance segment, the default and claim cycle begins with the receipt of a default notice from the  servicer. Reserves for losses are established upon receipt of notification by servicers that a borrower has missed two monthly  payments, which is when we consider a loan to be in default for financial statement and internal tracking purposes.  We also  establish reserves for associated LAE, consisting of the estimated cost of the claims administration process, including legal and  other fees and expenses associated with administering the claims process.  We maintain an extensive database of claim payment  history and use models, based on a variety of loan characteristics, including the status of the loan as reported by its servicer and  the type of loan product to determine the likelihood that a default will reach claim status. Our process includes forecasting the  impact of our loss mitigation ef forts in protecting us against fraud, underwriting negligence, breach of representation and  warranties, inadequate documentation of submitted claims and other items that may give rise to insurance rescissions and claim  denials, to help determine the default to claim rate. Lastly , we project the amount that we will pay if a default becomes a claim  (referred to as “claim severity”), which is also impacted by claim curtailments.  When there is a claim under primary mortgage  insurance, the coverage percentage is applied to the claim amount, which consists of the unpaid loan principal, plus past due  interest (for which our liability is contractually capped at a maximum of two years) and certain expenses associated with the  default, to determine our maximum liability . Based on these estimates at a given point in time, we arrive at our estimate of loss  reserves as of that time.