•  intervene in mortgage insurers’ rescission practices or rescission settlement practices with lenders (in  April 2011,  Freddie Mac advised its servicers that they must obtain its prior approval for settlements of claims to rescind  policies and Fannie Mae advised its servicers that they are prohibited from entering into such settlements; in  addition, under the terms of the GSE  Approvals, we may be required to obtain their prior consent for any settlements  and there can be no assurance that the GSEs will approve any settlement agreements); and  •  influence a mortgage lender’s selection of the mortgage insurer providing coverage.  Some of Freddie Mac’s and Fannie Mae’s programs require less insurance coverage than they historically have required,  and they have the ability to further reduce coverage requirements, which could reduce the amount of mortgage insurance  purchased and have an adverse ef fect on our business and revenues. For a number of years, the GSEs have had programs under  which lenders could choose, for certain loans, a mortgage insurance coverage percentage that was the minimum required by the  GSEs’ charter, with the GSEs paying a lower price for these loans (“charter coverage”). In the second quarter of 2010, Fannie  Mae broadly expanded the types of loans eligible for charter coverage.  To the extent lenders selling loans to Fannie Mae choose  charter coverage for loans that we insure, our revenues would likely be reduced.  The GSE business practices may be impacted by their results of operations, as well as legislative or regulatory changes  governing their operations. In July 2008, an overhaul of regulatory oversight of the GSEs was enacted.  The provisions  contained within HERA encompass substantially all of the GSE operations.  This new law abolished the former regulator for the  GSEs and created a new regulator, the FHFA, in addition to other oversight reforms. In September 2008, the FHF A was  appointed as the conservator of the GSEs to control and direct the operations of the GSEs.  The continued role of the  conservator may increase the likelihood that the business practices of the GSEs will be changed in ways that may have a  material adverse effect on us. In particular, if the private mortgage insurance industry does not have the ability , due to capital  constraints, to continue to write suf ficient business to meet the needs of the GSEs, the GSEs may seek alternatives other than  private mortgage insurance to conduct their business.  In February 2011, the Administration delivered a report to Congress with recommendations for reforming the U.S.  housing finance market. As part of this report, the Administration recommended the winding down of the GSEs over a period of  time, including by increasing pricing at the GSEs, reducing the size of loans that the GSEs may purchase, requiring borrowers  to provide a 10% down payment for GSE loans and decreasing the GSE investment portfolios by at least 10% each year . In  addition, the report encouraged the GSEs to pursue “additional credit-loss protection from private insurers and other capital  providers” in order to increase the level of private capital in the housing finance system.  These recommendations cannot be  implemented without legislative action; thus, some of them have been and will continue to be the subject of significant  Congressional focus and debate in the near future. Since 2011, there have been numerous legislative proposals that are intended to wind down the GSEs in a piecemeal  fashion. Among other changes, these bills, if ultimately enacted, would gradually reduce the GSE maximum portfolio size,  prohibit the GSEs from engaging in any new activities or businesses and repeal the GSE af fordable housing goals. In addition,  there were several comprehensive housing finance reform proposals introduced in Congress. Each of these proposals has been  designed to eliminate the GSEs, while most of them would also replace the GSEs with a new mortgage financing system.  The  proposals vary greatly with regard to the government’ s role in the housing market, and more specifically , with regard to the  existence of an explicit or implicit government guarantee. Most of the proposals would maintain the current role of private  mortgage insurance, while some of the proposals would provide for deeper mortgage insurance coverage. It is dif ficult to  predict whether any of these proposals will become law or the impact any future legislation will have on our business and  prospects.  The future structure of the residential housing finance system remains uncertain, including the impact of any such changes  on our business. Although we believe that traditional private mortgage insurance will continue to play an important role in any  future housing finance structure, it is reasonably possible that new federal legislation could reduce the level of private mortgage  insurance coverage used by the GSEs as credit enhancement, or even eliminate the requirement altogether , which would reduce  our available market and could adversely af fect our mortgage insurance business.  66