Triad and Lightyear in talks to create mortgage insurer

An investor group led by Lightyear would provide up to $400 million for the creation of the new company, with Lightyear providing $200 million. Triad would not initially hold an ownership stake in the new company.

Triad, which already operates a mortgage insurance business, has struggled in recent months because of a surge in delinquencies and defaults among mortgages. That has led to an increase in claims payments. Triad lost $77.5 million during 2007.

As part of the agreement, Triad would put its current operations into voluntary run-off a scenario in which the company books no new insurance business and instead just earns money on premiums already written.

Members of Triad's current management and many of its employees would join the new company, which would also purchase some of Triad's current assets.

The agreement is expected to close in four to six weeks. If reached, the deal would likely close during the third quarter.