FOLEY LARDNER

1940 Act/3c5

735 NORTH WATER STREET

MILWAUMEE 53202

TELEPHONE 44 273-0800

I.tOII OLEY

YNPORO LARDNER JR Mm-ISt$

JOSEPH E.RAPNIN

VERNON SWANSON

STEVEN LAME

ThEODORE SOLSt JAMES POOlE

PAUl SARNES

MARVIN E.Nl.ITSN

JOHN W.SYRNCS

JAMES SRODY

JOSEPH SARNETY

RICHARD NASRINSTON

ORIH PUNINTUN

A1.LCN AYLOR

GEORGE M.CHCST

NANROI.D MSCOM$

EDWIN WILEY

MCRSCRT WICDAMN

DAVID SECIIWIIII

YMAM PRECOURT

WII.UAM WILLIS

MARRY l.WAU.ACC

ROSEN SNADLEY

JOHN COI.UNS IIIU..sS7$

SESMARD NUSALE

EDWIN WALMER

RICHARD 14.NILLLR

DAVID SHUTE

WI4.UAN .1 KILRNAN JR

EUGENE C.DALY

JESt D.MCGAPPCY

SILSESY CNURCI4

DAVID 44 PLLCN

MAURICE J.NCSWCCIICY

TIMOTHY C.RAI.flSCNI

IRENCE .a .uaot

JAMES O.NUSER

SOREST SDNNCN

SOREST ORUINOMD

ROSERT WESEN

MIcHAEL S.NOLAN

PNILI.IP J.MANRAHAN

ROSEN CHRISTENSEN

DAVID CNOYSDALC

MARRY CANLSONJR

.40MM W.SAIIM

ALAN STCINNETZ

MOUNTS HANMINOJR CMJANIN GARMER III

RICHARD GALLAGHER

ANTHONY N4IO

kEITH CHRIS1IANSEN

GERALD .4 NEAL

SLNN DPASOUAl.E

JACk A.POR1CR

OEOPRCY GREIVELDNGCR

ENJAMIN .4 ASSOHAMS

EMORY IRELAND

DAVID W.SLOON

WILLIAM ISAAC

RONALD WALTER

JOHN SNILTON

JOHN DAWSOM

MICHAEL W.GRCSC

DENNIS NOLAN

DAVID OTT

ReSENT RAMS

RICHARD WCISS

PREDERICN PLLDRAMP

JAMES CLARk

PAUL C.PNCMTISS

JOSEPH .4 ZIIMOJR

MANN SUMNER

STANLEY JASPAN

JAMES CONNCI.LY

THOMAS L.SHRIMCJR

RICHARD PORTER

WILLIAM .4 ASRAHAMJR RICHARD D.OEOROC

LEONARD SOSNOWSIII

JOSEPH HILDCSNANDT

THOMAS RENNET

SRUCE C.GIIRIST

GEORGE CUNNINGHAM

ROSARY A.D.PUY

STANLEY A.YARNOW

SRIAN SURNC

___

WAYNE LUCOENS

--

W.DAVID ANON4 II

Gentlemen

Re MGIC Mortgage Corporation -- Letter of Division

of Investment Company Regulation dated

September 1972

MGIC Mortgage Corporation the Company is

in the business of sum cotinnitments to purchase and purchiiing

1ans ecureri by motgages on to ann residences inclifding indinmThIiiiits For detailed description of the

business of the Company reference is made to the Prospectus

dated January 24 1974 attached hereto as Exhibit The

Company also from time tortime sells mortgages from its

portfolio For description of such sales see Page 18 of

the Prospectus attached as Exhibit

In response to no-action letter request dated

June 21 1972 the Commission by letter dated September

1972 of the Division of Investment Company Regulation advised

the Company that the activities of the Company would not

constitute that of an investment company by reason of Section 3c5 of the Investment Company Act of 1940 For the

convenience of the Staff copy of the letter of the Coimnission

WASHINGTON OFFICE

SIS CONNECTICUT AVENUE

WASHINGTON D.C 20005

TELEPHONE 202 223-4771

MEMSCR OF DISTRICT

DY COI.UMSIA SAN

February 1974

ALLE3LAMJR

4on _5TC1-- Securities and Exchange Commission

500 North Capitol Street N.W ______ 

-_____._ Washington 20549

a11ab11ity

Attenti Alan Rosenbiat Chief cosei ii i974

Divis ion of Investment Management Regulation
Securities and Exchange Commission

February l974

Page Two

is attached as Exhibit and copy of the letter on behalf of

the Conipany is attached hereto as Exhibit

Description of Participation Agreement

The Company now seeks vi lett

Se tember 1972 to exten ica

1e partici draft of form of Participation

is attached hereto as Exhibit

Insiimmarv the -Ageemen-t-wi-llrelate to investent fora

mos gven and_4a spcified yield in designated pool of

in whiciihe Caiy retains_aInuiæ

1age 9wnership inteit Segreexnent Participation

Certificate/Exhibit Generally neither the term nor the

yield will be the same as the average maturity of or yield on

the mortgages included in the pool

All mortgage loans subject to the Agreement must

meet the requirements of and have been purchased by the

Company pursuant to the MGIC/MC Master Agreement and will be

serviced by servicer subject to the MGIC/MC Servicers Guide

The forms of Master Agreement and Servicers Guide are attached

hereto as Exhibits and respectively The Agreement also

provides that for specified period in the eventof default

in the payment of principal and interest due on any mortgage

loan for perioof 90 consecutive days after the due date of

any payment thereon the Company will promptly purchase at

par the Participants full participation share in the loan

See Agreement Paragraph The Company agrees to submit

reports in reasonable detail and to remit to the Participant

on or before the 15th day of the month following the month

the mortgage payments are due the Participants pro rata share

of principal and interest on the mortgage loans at negotiated

rate See Agreement Paragraph

Under he terms of the Agreement the py_s

responsible for supervising the servicin of mort age loans

bjhe sarvct__a other matters with respect toTjage

loans included in the.participation such as enfnrc.emen-tof

co ns and foreclosure See Agreement Paragraphs

and In the even insolvency or bankruptcy of the Company
Securities and Exchange Commission

February 1974

Page Three

the mernent provides that the artCLipant$hÆ11 have the

right to exercis rs nd the mort

records thereof sh 11 be delivered to the

Participant together with appropriate assignments and ocu

menuthority See Agreement Paragraph 11

Business Reason for Sale of Participations vs

Sale of Whole Loan Mortgages

Participation arrangements in mortgage investments

by two or more institutional lenders perform number of useful

economic functions Direct_who1e tae_loan ownership

involves many legal requirements qualification for doing

bus inesŁ7 etc as welTas ttnaieceapÆbre

specialized administrative organization su ervising servicing

gnmaint ininginiviua oan repayments ftitri1s

supervising delinquent collection and defaI.t pcess1ng etc

involve additional

administrative and legal expenses preparing and recording

assignments etc.

With artici ation condar investor

may avoid either or both of qualification for recorded mor

gage ownership arid the largely fixed expense of maintaining

specialized staff to administer the functions of mortgage

loan ownership as well as transfer expenses since formal

recorded ownership is retained by lead investor

Thus even as between two similar fully qualified

and organized mortgage loan investors there are significant

economies of expense in the purchase of participation interest

as compared with the purchase of similar value of whole

mortgage loans These considerations are particularly relevant

for those classes of institutional investor who have never

had e.g pension funds or who have disbanded e.g most

life insurance companies specialized mortgage loan ownership

sub-organizations

Many such investors are now interested in mortgage

loan investments at proper competitive yield -- provided
Securities and Exchange Commission

February 1974

Page Four

that the organizational and legal requiremens can be avoided

The participation inttrest technique offers them this possibility

and thereby opens up large segment of potential investment

in home mortgage loans which has been continuing object

of public policy studie for number of years

1it.1iniqiies of_ptiaipa4en- have_.hen_s44ly

dey1oped as between ions and

between ngs and loan associations and uali mo

loin on in an cers im etus of Federal

Home Loan Bank and Fedezal-SwiLngs nd Lcr Insurance pora

ton regulations the use of artici ation erest

aamear.s faci1itatijg

inyestmentbe twe fjnnc ia._ims tut ionstheyegulate

and insure

Pension and trust fund interest in an acquaintance

ship with the investment flow characteristics of mortgage

participations has been developed more recently through the

ener ence of pass-through type mortgage-backed securites

sp sored ona Mort Association

The familiarity an experience gained through the simplicity

of the GNMA guaranteed securities creates potential recep

tivity to similar pass-through investments in nongovernmental

mortgage loans which could substantially enlarge the potential

national pooi of funds from which mortgage loan investments

can be drawn

Criteria For Sale of Participation Interests

The Company anticipates that the dollar amount of

participations sold could amount tppxoximate1y 4070 of he

dol amount of cumulative purhnes of oans

The Company as structure various criteria for the sale of

participation interests the nse uence of which will be to

re trict such sales solely to professiona ga investor

institu ons ese criteria are principa ly as fo

Transaction Size The initial minimum dollar

equivalent of the percentage participation in the mortgage

pool would be $500000
Securities and Exchange Commission

February 1974

Page Five

Institutional Character of Participants Only

the following investors will be eligible to purchase

participation mortgage companies commercial banks state

and federally chartered savings and loan associations

mutual savings banks insurance companies and pension funds

Number of Participants The number of

participants excluding the Company in single participation

would be limited to one

Restriction on Transfer No resale or subparticipation of the interest could be made without the

consent of the Company and in any event only in conformity

with the foregoing standards of transaction size number of

participants and institutional character of participants

Paragraph of the Agreement in final form will reflect this

limitation

Accordingly_because of thesd_.criteriapase..

the participatIwiii be restricted to the area

professional mortgage_investing insti ere the

pro pliThy

Conclusion

The letter of the Division of Investment Company

Regulation dated September 1972 limited the Companys

business activities to dealing in whole loans not in

participations or fractional interests in individual or

pooled mortgages or deeds of trust Nevertheless to the

extent such letter was based upon 3c5 of the 40 Act

we and the Company believe that such letter should continue

to be applicable to these additional business activities

The Company requests that the letter be restated

to reflect the described change in the business of the

Company However if the Staff of the Division believes

that such restatement is inappropriate the Company requests

conference to discuss an application by the Company for an

exemption order under Section 6c of the Investment Company

Act of 1940
Securities and Exchange Commission

February 1974

Page Six

Three copies of this letter are being submitted

herewith

Very truly yours

Benjamn Garmer III

Exhibit Prospectus dated January 24 1974

Letter of Division of Investment Company

Regulation datebd September 1972

Letter of Foley Lardner dated June 21 1972

Preliminary Form of Participation Agreement

MGIC/MC Master Agreement

MGIC/MC Servicers Guide

CC Commissioner John Evans

As you know in our view l4flC Mortgage Corporation lIC/MC

to rely upon the exception to the def

inition of investment company contained in Section 3c5C

of the Investment Company Act of 1940 Act iVICiwere

toen age pritnaril in or otherwise acquiring

participations or fraction erests in in ua or pooled

rtgaideeds oi HowevØbied on the facts

presented and the representations made in this letter and its

attachments and the attached supplementary letter of April

16 1974 we would not reconmiend that the Conmii an

tion if MIC/MC is primarily engage the acquisition of

mor ga part ation sts rovided such interests

are created by the fractionalization urtgage loans

or ools of mortgage oans een

IC MC IC reta ns continuin ercentage ownership

es St .107 in ea rtgage loan or poo

thereof whic as fractionalized I.tllC MC alone is the

roughout th art on has comp ete superviso

re servic ng mortga 1ois.

uded in articipation and has so scre on as to

enforcement of co ec the institut on and prosedution

oreclosure or similar le al as set fo

paragraph of articipation Agreement Exhibit copy

attached
The condi oare intended to insur aLLMIC gJ

primaril in nterests in whole es

oJiereoLinth xmer_describeIC_jaye

asubstantial2inuing ownrhip interestIn stth rtgag

and poois Æinrestrictedcontrol over the enforcement th

lien and other matter ch rt ba so rt est retained by MIC/ would 1e an inte_in

saer

Sidney Ciet Assistant Chief Counsel

Division of Investment Management Regulation

cc Mark Lezell

Division of Corporation Finance

Jeff Steele

Division of Market Regulation

SLCds