Exhibit 10.21

                   MORTGAGE INSURANCE STOP LOSS EXCESS OF LOSS
                     REINSURANCE AGREEMENT (the "Agreement")

                    FINAL PLACEMENT SLIP
                    --------------------

COMPANY:            Triad Guaranty Insurance Corporation, an
                    Illinois-domiciled insurance company.

LEAD
REINSURER:          Capital Mortgage Reinsurance Company.

TERM:               Commencing on the Effective Date and continuous thereafter
                    unless and until terminated in accordance with the
                    "Termination" provisions below.

EFFECTIVE
DATE:               11:59 p.m. on December 31, 1999.

TERMINATION:        The  Agreement  may be  terminated  on a Run-Off Basis as of
                    11:59 p.m. on December 31, 2002 or any  subsequent  December
                    31 by either party upon not less than 90 days' prior written
                    notice  delivered by certified or  registered  mail.  In the
                    event of such a  termination,  such December 31 shall be the
                    "Termination Date".

                    In the event  the  Risk-to-Capital  Ratio  for any  calendar
                    quarter  exceeds  25-to-1  and the  Combined  Ratio for such
                    calendar  quarter exceeds 100%, the Reinsurer shall have the
                    right to  terminate  the  Agreement  on a  Run-Off  Basis by
                    notice to the Company  delivered by certified or  registered
                    mail.  In the event of such a  termination,  the end of such
                    calendar quarter shall be the "Termination Date".

                    In the  event  the  Company  fails  to make any  payment  of
                    Reinsurance  Premium due hereunder within 30 days of written
                    notice from the Reinsurer  that such amount is overdue,  the
                    Reinsurer shall have the right to terminate the Agreement on
                    a  Cut-Off  Basis by  notice  to the  Company  delivered  by
                    certified  or  registered  mail  (unless  the failure of the
                    Company to pay Reinsurance  Premium  hereunder is due to the
                    Reinsurer's  failure  to pay  Covered  Losses  owing  by the
                    Reinsurer hereunder);  provided, if the Company's failure to
                    pay is the direct  result of the  insolvency of the Company,
                    the Reinsurer  shall instead have the right to terminate the
                    Agreement  on a  Run-Off  Basis.  In  the  event  of  such a
                    termination,   the  date  of  such   notice   shall  be  the
                    "Termination Date".

                                  Page 1 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


TERMINATION:        In the event the parties enter into the Optional Reinsurance
(cont'd)            Agreement  and the  Company  fails  to make any  payment  of
                    premium due under the Optional Reinsurance  Agreement within
                    30 days of  written  notice  from the  Reinsurer  that  such
                    amount is  overdue,  the  Reinsurer  shall have the right to
                    terminate  the Agreement on a Cut-Off Basis by notice to the
                    Company  delivered by certified or  registered  mail (unless
                    the failure of the Company to pay premium under the Optional
                    Reinsurance  Agreement is due to the Reinsurer's  failure to
                    pay  losses  owing  by  the  Reinsurer  under  the  Optional
                    Reinsurance  Agreement);  provided, if the Company's failure
                    to  pay is  the  direct  result  of  the  insolvency  of the
                    Company,  the  Reinsurer  shall  instead  have the  right to
                    terminate the Agreement on a Run-Off Basis.  In the event of
                    such a  termination,  the date of such  notice  shall be the
                    "Termination Date".

                    In the event the  Company is merged into  another  entity or
                    acquired by another  entity such that the Company is not the
                    surviving  entity,  the  Reinsurer  shall  have the right to
                    terminate  this  Agreement  on either a  Run-Off  Basis or a
                    Cut-Off  Basis (at the election of the  Reinsurer) by notice
                    to the Company  delivered by certified  or  registered  mail
                    within 90 days of the date of announcement of the completion
                    of the  merger  or  acquisition.  In  the  event  of  such a
                    termination,  the  date  of  completion  of  the  merger  or
                    acquisition shall be the "Termination Date".

                    "Run-Off  Basis"  means  that,  subject  to  the  terms  and
                    conditions hereof, the Reinsurer shall remain liable through
                    the end of the Run-Off Period with respect to Covered Losses
                    arising from  Certificates  issued prior to the  Termination
                    Date,  and  the  Company  shall  remain   obligated  to  pay
                    Reinsurance Premium through the end of the Run-Off Period.

                    "Run-Off  Period" means the 10-year period  commencing as of
                    11:59 p.m. on the Termination Date.

                    "Cut-Off  Basis" means that (i) the Reinsurer  shall have no
                    liability  for Covered  Losses paid by the Company after the
                    Termination   Date  and  (ii)  the  Company  shall  have  no
                    obligation to pay  Reinsurance  Premium for any period after
                    the Termination Date.


                                 Page 2 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


COVERED
BUSINESS:           Certificates  issued by the  Company  prior to or during the
                    Term;  provided that,  with respect to  Certificates  issued
                    prior to the Term, such  Certificates are in force as of the
                    Effective Date.

                    "Certificates"  means the certificates issued by the Company
                    pursuant to the terms and conditions specified in any Master
                    Policy  that  extend  the  indicated   coverage   option  to
                    specified loans and renewals thereon.

                    "Master  Policies"  means the  mortgage  guaranty  insurance
                    policies  issued by the Company to mortgage  lenders setting
                    forth the  terms and  conditions  of the  mortgage  guaranty
                    insurance provided by the Company.

TERRITORY:          USA, its territories and  possessions,  to follow the Master
                    Policies and Certificates included in the Covered Business.

LIMIT &
RETENTION:          Once the  aggregate  losses  payable  under the  First  Loss
                    Reinsurance equal $25 million, the Reinsurer shall be liable
                    for  subsequent  Covered  Losses  paid by the Company in any
                    calendar  quarter  during the Term and any Run-Off Period in
                    which (i) the Risk-to-Capital Ratio exceeds 25-to-1 and (ii)
                    the Combined  Ratio  exceeds  100%,  subject to the Limit of
                    Liability.

                    "First Loss Reinsurance"  means the Mortgage  Insurance Stop
                    Loss Excess of Loss Reinsurance Agreement.

                    "Covered  Losses" means losses and allocated loss adjustment
                    expenses paid by the Company during the Term and any Run-Off
                    Period in respect of the Covered  Business  less any salvage
                    or recovery (including reinsurance recoveries other than the
                    reinsurance  provided  hereby).  (Covered  Losses  shall not
                    include payments for extra-contractual obligations or losses
                    in excess of policy limits.)

                    "Risk-to-Capital  Ratio" means, with respect to any calendar
                    quarter,  (i)  (A) the  aggregate  of the  Coverage  Percent
                    multiplied by the Current  Principal Amount as of the end of
                    such  calendar  quarter of each  mortgage loan insured under
                    the  Certificates  included in the Covered Business less (B)
                    risk  ceded  to  reinsurers  with  respect  to  the  Covered
                    Business, divided by (ii) the Company's statutory surplus as
                    regards  policyholders  as of such calendar quarter end plus
                    the  Company's  contingency  reserves  as of  such  calendar
                    quarter  end (as  such  statutory  surplus  and  contingency
                    reserves are  reported in the  Company's  statutory  filings
                    with the Illinois regulators).

                                Page 3 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


LIMIT &
RETENTION:
(cont'd)            "Coverage  Percentage"  means, with respect to a Certificate
                    included in the Covered  Business,  the coverage  percentage
                    specified on the face of such Certificate.

                    "Current   Principal   Amount"  means,  with  respect  to  a
                    Certificate  included in the  Covered  Business at any date,
                    the  latest  reported  principal  amount at such date of the
                    loan insured under such Certificate.

                    "Combined  Ratio"  means,   with  respect  to  any  calendar
                    quarter, the sum of (i) losses and allocated loss adjustment
                    expense  incurred in such calendar quarter divided by earned
                    premium   for  such   calendar   quarter   and  (ii)   other
                    underwriting  expenses  incurred  in such  calendar  quarter
                    divided by written premium for such calendar quarter, as the
                    same are reported in the  Company's  statutory  filings with
                    the Illinois regulators.

                    "Limit  of  Liability"  means  (i)  from and  including  the
                    Effective  Date to and including  December 31, 2000, the sum
                    of the Initial Limit and each Additional Limit and (ii)after
                    December 31, 2000, Covered Losses in an amount equal to $100
                    million;  provided,  however, in the event the Company fails
                    to make any payment of Reinsurance  Premium due hereunder as
                    a direct result of the  insolvency of the Company  within 30
                    days of written  notice from the Reinsurer  that such amount
                    is overdue,  the Limit of  Liability  shall be reduced  (but
                    only for purposes of  determining  Covered Losses payable by
                    the Reinsurer hereunder, and not for purposes of determining
                    the  Reinsurance  Premium)  by an  amount  equal  to (i) the
                    Reinsurance  Premium payable  hereunder  during the Term and
                    any  Run-Off  Period  less  (ii)  the  Reinsurance   Premium
                    actually paid hereunder.

                    "Initial  Limit" means Covered  Losses in an amount equal to
                    $50 million.

STAND-BY LIMIT:     As of the  beginning of each calendar  quarter of 2000,  the
                    Company may increase the then-current  Limit of Liability by
                    an amount up to $12.5  million  upon  written  notice to the
                    Reinsurer  delivered within 30 days of the beginning of such
                    quarter  or,  with  respect  to the first  quarter  of 2000,
                    within 60 days of the  beginning of such quarter (the amount
                    of  each  such   increase   is  referred  to  herein  as  an
                    "Additional Limit").

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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


STAND-BY LIMIT
PREMIUM:            A quarterly  amount  payable within 30 days of the beginning
                    of each calendar quarter of 2000 as follows:

                    1st Quarter: $50,000
                    2nd Quarter: $37,500
                    3rd Quarter: $25,000
                    4th Quarter: $12,500

LOSS EXPENSE:       Included within the Limit of Liability.

REINSURANCE
PREMIUM:            An annual  amount  equal to 2.1% of the Limit of  Liability,
                    payable  quarterly  within 30 days of the  beginning of each
                    calendar  quarter  during the Term and any Run-Off Period on
                    the Limit of  Liability  in effect at the  beginning of such
                    quarter.

OPTIONAL
REINSURANCE
AGREEMENT:          If, with respect to any calendar  quarter during the Term or
                    the  Run-Off  Period,  the  Risk-to-Capital   Ratio  exceeds
                    23-to-1,  then, upon notice by the Lead Reinsurer (which may
                    be given  at the  Lead  Reinsurer's  sole  discretion),  the
                    Company  and the  Reinsurer  shall,  within  30 days of such
                    notice,  enter into a Primary Mortgage Insurance Quota Share
                    Agreement  substantially  in the form of Appendix A attached
                    hereto (the "Optional Reinsurance Agreement").

REINSURER
DOWNGRADE:          In the event of a Reinsurer  Downgrade by any Rating Agency,
                    the Reinsurer shall, within 30 days of the occurrence of the
                    Reinsurer Downgrade,  (i) restore the Reinsurer's  financial
                    strength  rating  by such  Rating  Agency  to at  least  the
                    Required  Rating,  (ii)  deliver  a  guarantee  in form  and
                    substance   satisfactory  to  the  Company  from  an  entity
                    satisfactory to the Company, guaranteeing the obligations of
                    the Reinsurer hereunder, (iii) provide evidence, in form and
                    substance  satisfactory  to the Company,  that a third party
                    reinsurer,  acceptable to the Company,  has agreed to assume
                    or  reinsure  on a  stand-by  basis the  obligations  of the
                    Reinsurer  hereunder,  (iv)  deliver a letter of credit,  in
                    form and substance satisfactory to the Company,  issued by a
                    bank  satisfactory to the Company,  securing the obligations
                    of the  Reinsurer  hereunder  or (v)  otherwise  satisfy the
                    Company as to the Reinsurer's claims paying ability.

                                Page 5 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


REINSURER
DOWNGRADE:
(cont'd)            "Reinsurer   Downgrade"  means  the  Reinsurer's   financial
                    strength rating by any Rating Agency is downgraded below the
                    Required Rating.

                    "Required  Rating"  means,  with respect to S&P, a financial
                    strength  rating of "AA-"  and,  with  respect  to any Other
                    Rating Agency,  the financial strength rating issued by such
                    Other  Rating  Agency  that  is  the  equivalent  of an  S&P
                    financial strength rating of "AA-";  provided,  however,  if
                    any Rating  Agency  gives  less  credit to the  Company  for
                    reinsurance  provided  by  a  "AA-"  (or  equivalent)  rated
                    reinsurer than it gives for  reinsurance  provided by a "AA"
                    (or equivalent) rated reinsurer, Required Rating shall mean,
                    with  respect to such Rating  Agency,  a financial  strength
                    rating of "AA" or its equivalent.

                    "S&P" means  Standard and Poor's Rating Group, a division of
                    McGraw Hill, Inc.

                    "Other Rating  Agencies"  means any rating  agencies,  other
                    than S&P, that, after the Effective Date, rate the financial
                    strength of the Reinsurer.

                    "Rating Agencies" means S&P and the Other Rating Agencies.

OTHER
REINSURANCE:        Except as provided in the "Covenants"  section,  the Company
                    has the right to purchase additional reinsurance.

REPORTS &
REMITTANCES:        Within 45 days after the end of each calendar  quarter,  the
                    Company will submit to the Reinsurer the following reports:

                    1.   Risk in Force.  Gross  insurance in force for all risk,
                         including  gross risk  outstanding  and gross  unearned
                         premiums thereon,  before any deduction for reinsurance
                         hereunder.

                    2.   Reinsured  Loans in Default.  The number of loans which
                         have been  reported  in  default,  the total  aggregate
                         principal  balance of such loans, the maximum potential
                         risk for such loans in default,  the reserve before any
                         deduction for reinsurance therefor that the Company has
                         established, and the Reinsurer's share of such reserve.

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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


REPORTS &
REMITTANCES:
(cont'd)            3.   Claims  Received.  The number of loans for which claims
                         have been received (but not paid), the aggregate amount
                         of such claims,  the reserve  therefor that the Company
                         has established  before deduction for reinsurance,  the
                         Reinsurer's share of such reserve and, in the event the
                         First  Loss  Reinsurance   attaches,   the  information
                         specified in Appendix B.

                    3.   Loan  Level  Detail.  A computer  readable  tape in the
                         standard "MICA" format detailing such Quarterly Cycle's
                         lending.

                    4.   Premiums.  A summary of  aggregate  loan  balances  for
                         which  either an initial  premium  or  renewal  premium
                         therefor  was paid to the  Company,  the gross  written
                         premiums and unearned premium reserves.

                    5.   Reinsurance Premiums. Reinsurance Premiums due from the
                         Company.

                    6.   Reinsurance Claims.  Covered Losses and the amounts, if
                         any, due from the Reinsurer.

                    The balance  after  offset due to a party by the other party
                    with respect to any calendar quarter shall be paid (i) if to
                    the  Company,  within 15 days  following  the receipt by the
                    Reinsurer  of  the  quarterly   report  delivered  for  such
                    calendar  quarter  end (ii) if to the  Reinsurer,  within 45
                    days  after  the  end  of  the  calendar  quarter  and as an
                    accompaniment  to the  quarterly  report  delivered for such
                    calendar quarter.

EXCLUSIONS:         (i) Pool insurance (other than Co-Primary  Insurance),  (ii)
                    assumed  reinsurance,  (iii) business insured by the Company
                    other than the Covered  Business,  (iv) bad faith,  punitive
                    damages or other extracontractual liability asserted against
                    the Company, its officers,  directors,  employees or agents,
                    (v) any payment by the Company in excess of its  contractual
                    obligations  under a Master Policy or Certificate,  and (vi)
                    unallocated  office  expenses of the Company and salaries of
                    officials and employees of the Company.

                    "Co-Primary   Insurance"  means  "modified"  pool  insurance
                    issued by an insurer  which  covers  loans  with  respect to
                    which such insurer has issued a primary  policy.  Co-Primary
                    Insurance  has  the  following   characteristics:   (i)  the
                    coverage  percentages are 16% for 95% LTV loans, 12% for 90%
                    LTV loans and 6% for 85% LTV loans and (ii) it is  available
                    to pay up to an  additional  60% over the  primary  coverage
                    level up to a  cumulative  total  of  1.75% of the  original
                    amount of insurance written.

                                Page 7 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


COVENANTS:          In the event the Company terminates,  modifies or amends the
                    First Loss  Reinsurance,  the Company will be liable for the
                    First Loss  Reinsurance  limit of $25  million  (unless  and
                    until it obtains other reinsurance to replace the First Loss
                    Reinsurance).  In no event will the  Reinsurer be liable for
                    that $25 million under this Agreement.

                    The Company shall not purchase additional reinsurance on the
                    Covered  Business  (other  than  excess of loss  reinsurance
                    which attaches above the reinsurance  provided hereunder and
                    other than reinsurance purchased in connection with any risk
                    sharing  captive  arrangements)  without  the prior  written
                    consent  of  the  Reinsurer,  which  consent  shall  not  be
                    unreasonably withheld.

                    The Company  shall take all  necessary  actions to prudently
                    manage the Covered Business and the Covered Losses.

                    Except  as  otherwise  provided,  the  reinsurance  will  be
                    subject to the terms, conditions, interpretations,  waivers,
                    modifications  and alterations of the Certificates  included
                    in the Covered  Business.  The  Agreement  shall contain the
                    following general terms.

                    Insolvency Clause
                    Arbitration  Clause  (final  and  binding;  North  Carolina)
                    Entire Agreement/Amendments Clause
                    Taxes Clause
                    Access to Records (Company has right  to  approve/disapprove
                      of third party representatives of the Reinsurer;  provided
                      the Company must act reasonably;  provided  further  that,
                      if  the  Company  disapproves  of  a  representative,  the
                      Company  must  provide  the  Reinsurer  with  the names of
                      acceptable alternatives)
                    Loss Notices and Settlements Clause
                    Delays, Errors and Omissions Clause
                    Offset  Clause (both within the  Agreement  and between this
                      Agreement and the Optional Reinsurance Agreement)
                    Definitions Clause
                    Salvage and Subrogation Clause
                    Service of Suit Clause
                    Governing Law Clause (New York)
                    Currency (US Dollars) Clause
                    Confidentiality   Clause  (relating  to  loan  level  detail
                      provided in MICA format)
                    Aon Re Inc. Intermediary Clause

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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS



In  accordance  with  your  instruction  we have  placed  reinsurance  with  the
Reinsurer(s)  listed  hereon,  subject to the terms and  conditions  hereinabove
stated.  We ask  that  you  promptly  advise  us if the  terms,  conditions,  or
Reinsurer(s) vary in any respect from your instructions. Aon Re Inc. will not be
responsible for the financial or other obligations of any  Reinsurer(s).  Should
you desire  financial  information  regarding the  Reinsurer(s)  listed  hereon,
please contact us and we will furnish it.

The Reinsurers'  obligations  under this Agreement are several and not joint and
are  limited  solely  to the  extent  of their  individual  participations.  The
Reinsurers  are  not  responsible  for  the  participation  of  any  co-scribing
Reinsurer who for any reason does not satisfy all or part of its obligations.

REINSURED WITH                                    PERCENTAGE
--------------                                    ----------
DOMESTIC COMPANIES
------------------
Capital Mortgage Reinsurance Company               95.00%
Federal Insurance Company                           5.00%
                                                  -------
         Total Domestic Companies                 100.00%

         TOTAL ALL PARTICIPANTS                   100.00%

Assuming that you find everthing in order,  please  indicate your acceptance and
approval by signing and returning this Final Placement Slip to Aon Re Inc.

ACCEPTED &
APPROVED:
         -----------------------------------------------------------------------

REFERENCE
NUMBER:                                           DATED:
        -----------------------------------------       ------------------------

(For  processing  purposes  it is  important  that you  provide  your  Company's
reference number for this program.)


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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A

                       FORM OF PRIMARY MORTGAGE INSURANCE
                        QUOTA SHARE REINSURANCE AGREEMENT

COMPANY:            Triad Guaranty Insurance Corporation,  an Illinois-domiciled
                    insurance company.

REINSURER:          Capital Mortgage Reinsurance Company.

TERM:               Commencing  at  12:01  a.m.  on  the   Effective   Date  and
                    terminating  on a  Cut-Off  Basis  on the  later  of (i) the
                    Termination  Date (as such term is  defined in the Excess of
                    Loss Agreement)  under the Excess of Loss Agreement and (ii)
                    the last day of the Run-Off  Period (as such term is defined
                    in the  Excess of Loss  Agreement)  under the Excess of Loss
                    Agreement (such date, the "Q/S Termination Date").  "Cut-Off
                    Basis" means that (i) the Reinsurer  shall have no liability
                    for  Covered  Losses  paid  by the  Company  after  the  Q/S
                    Termination   Date  and  (ii)  the  Company  shall  have  no
                    obligation to pay  Reinsurance  Premium for any period after
                    the Q/S Termination Date.

                    "Excess  of  Loss  Agreement"   means  the  Excess  of  Loss
                    Reinsurance  Agreement  dated as of January 21, 2000 entered
                    into between the Company and the Reinsurer.

EFFECTIVE
DATE:               The date of the notice  delivered  pursuant to the "Optional
                    Reinsurance  Agreement"  provisions  of the  Excess  of Loss
                    Agreement.

REINSURANCE
TYPE:               Quota Share.

COVERED
BUSINESS:           Certificates issued during the Underwriting Year(s) that (i)
                    begin prior to the commencement of, or during,  the Term and
                    (ii) are  specified by the  Reinsurer  under the  "Selection
                    Option"   provisions;   provided   that,   with  respect  to
                    Certificates  issued during  Underwriting  Year(s) beginning
                    prior to the commencement of the Term, such Certificates are
                    in force as of the Effective Date; provided,  further,  that
                    Certificates   issued  during  any   Underwriting   Year  in
                    connection with the Loan Performance Guaranty program,  Loan
                    Performance  Guaranty  Plus  program,  LEAP  program and any
                    other risk sharing captive program and  representing no more
                    than 50% of the Original  Principal  Amount of  Certificates
                    issued during such  Underwriting Year shall be excluded from
                    Covered Business on a last in first out basis.


                               Page 10 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

COVERED
BUSINESS:
(cont'd)            "Certificates"  means the certificates issued by the Company
                    pursuant to the terms and conditions specified in any Master
                    Policy  that  extend  the  indicated   coverage   option  to
                    specified loans and renewals thereon.

                    "Master  Policies"  means the  mortgage  guaranty  insurance
                    policies  issued by the Company to mortgage  lenders setting
                    forth the  terms and  conditions  of the  mortgage  guaranty
                    insurance provided by the Company.

                    "Underwriting  Year" means  January 1 through  December  31,
                    both dates inclusive, of any year.

                    "Original   Principal  Amount"  means,  with  respect  to  a
                    Certificate  included in the Covered Business,  the original
                    principal  amount  advanced  by  the  mortgage  lender  with
                    respect to a loan insured under such Certificate.

TERRITORY:          USA, its territories and  possessions,  to follow the Master
                    Policies and Certificates included in the Covered Business.

COVERAGE:           For  each   Underwriting   Year  selected  pursuant  to  the
                    "Selection Option"  provisions,  the Reinsurer shall pay the
                    Underwriting  Year   Participation   with  respect  to  such
                    Underwriting  Year of Covered  Losses  with  respect to such
                    Underwriting Year.

                    "Underwriting  Year  Participation"  means,  with respect to
                    each  separate  Underwriting  Year selected by the Reinsurer
                    pursuant to the  "Selection  Option"  provisions,  the quota
                    share percentage specified by the Reinsurer,  subject to the
                    "Maximum Share" and "Participation  Limit"  provisions.  For
                    the avoidance of doubt, the Underwriting Year  Participation
                    may  be  different  for  each   Underwriting  Year  selected
                    pursuant to the "Selection Option" provisions.

                    "Covered  Losses"  means,  with  respect to an  Underwriting
                    Year, losses and allocated loss adjustment  expenses paid by
                    the  Company  during  any  Applicable  Period in  respect of
                    Certificates  issued during such Underwriting Year, less any
                    salvage or recovery (including  reinsurance recoveries other
                    than those  pursuant  to this  Agreement).  (Covered  Losses
                    shall not include payments for extra-contractual obligations
                    or losses in excess of policy limits.)

                                  Page 11 of 20
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TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

COVERAGE:
(cond't)            "Applicable  Period" means any calendar  quarter  during the
                    Term in which the Risk-to-Capital-Ratio  (determined without
                    the benefit of this Agreement) exceeds 23-to-1.

                    "Risk-to-Capital  Ratio" means, with respect to any calendar
                    quarter,  (i)  (A) the  aggregate  of the  Coverage  Percent
                    multiplied by the Current  Principal Amount as of the end of
                    such  calendar  quarter of each  mortgage loan insured under
                    the  Certificates  included in the Covered Business less (B)
                    risk  ceded  to  reinsurers  with  respect  to  the  Covered
                    Business, divided by (ii) the Company's statutory surplus as
                    regards  policyholders  as of such calendar quarter end plus
                    the  Company's  contingency  reserves  as of  such  calendar
                    quarter  end (as  such  statutory  surplus  and  contingency
                    reserves are  reported in the  Company's  statutory  filings
                    with the Illinois regulators).

                    "Coverage  Percentage"  means, with respect to a Certificate
                    included in the Covered  Business,  the coverage  percentage
                    specified on the face of such Certificate.

                    "Current   Principal   Amount"  means,  with  respect  to  a
                    Certificate  included in the  Covered  Business at any date,
                    the  latest  reported  principal  amount at such date of the
                    loan insured under such Certificate.

SELECTION
OPTION:             On each Selection  Date, the Reinsurer  shall be entitled to
                    select any one or more  Underwriting  Year(s) to reinsure on
                    the terms and  conditions set forth herein by written notice
                    to the  Company.  For the  avoidance  of  doubt,  each  such
                    selection  shall  be at the  Reinsurer's  sole  option.  The
                    Company shall give the Reinsurer  prompt  written  notice of
                    each occurrence of a Ratio Deterioration Trigger.

                    "Selection Date" means any of the following dates:
                    (i)  a date no later than 45 days  following  the  Effective
                           Date; and
                    (ii) a date no later  than 45 days  following  notice to the
                           Reinsurer  that a Ratio  Deterioration   Trigger  has
                           occurred.

                    "Ratio Deterioration  Trigger" means that, subsequent to the
                    payment by the Reinsurer of a Profit  Commission  hereunder,
                    the Risk-to-Capital Ratio has exceeded 23-1.

                                  Page 12 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

MAXIMUM
SHARE:              The Underwriting Year Participation shall not exceed 50% for
                    any Underwriting Year selected by the Reinsurer  pursuant to
                    the "Selection Option" provisions.

PARTICIPATION
LIMIT:              The   Reinsurer's   aggregate   participation   across   all
                    Underwriting  Years  selected  pursuant  to  the  "Selection
                    Option"  provisions shall be limited to an amount sufficient
                    to reduce the  Risk-to-Capital  Ratio to, but not less than,
                    23-to-1. If the Reinsurer's  aggregate  participation across
                    all Underwriting  Years exceeds such limit, the Underwriting
                    Year  Participation  for  each  Underwriting  Year  selected
                    pursuant  to the  "Selection  Option"  provisions  shall  be
                    reduced in accordance with the instructions of the Reinsurer
                    so that the Reinsurer's  aggregate  participation across all
                    Underwriting Years does not reduce the Risk-to-Capital ratio
                    to less than 23-to-1.

LOSS EXPENSE:       Included within the Limit of Liability.

REINSURANCE
PREMIUM:            The Company shall pay the  Reinsurer  for each  Underwriting
                    Year selected pursuant to the "Selection  Option" provisions
                    a  pro-rata   amount   (equal  to  the   Underwriting   Year
                    Participation)  of the Company's  gross  primary  premium on
                    Covered  Business  for  such  Underwriting  Year  due to the
                    Company  during  each  Applicable  Period.  The  Reinsurance
                    Premium shall be paid quarterly in arrears.

CEDING
COMMISSION:         The Reinsurer shall allow a Ceding  Commission  equal to 20%
                    of the Reinsurance Premium.

PROFIT
COMMISSION:         On each Profit Commission Date, a Profit Commission shall be
                    paid by the  Reinsurer  to the Company in an amount equal to
                    90%  of  the  Notional   Account   Balance  at  such  Profit
                    Commission Date, to the extent such balance is positive. The
                    Company shall give the Reinsurer  prompt  written  notice of
                    each occurrence of a Ratio Improvement Trigger.

                    "Profit  Commission Date" means a date no later than 60 days
                    following  notice to the Reinsurer that a Ratio  Improvement
                    Trigger has occurred.

                    "Ratio Improvement  Trigger" means that the  Risk-to-Capital
                    Ratio has become less than or equal to 23-to-1.

                                  Page 13 of 20

<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

NOTIONAL
ACCOUNT:            A Notional  Account  shall be  calculated  by the Company as
                    described  below as of the Effective  Date and  periodically
                    (but no less than  quarterly)  throughout the Term (the date
                    as of which any such  calculation  is made being referred to
                    herein as a "Calculation  Date"). On the Effective Date, the
                    balance  of the  Notional  Account  (the  "Notional  Account
                    Balance")  shall  equal  zero.  On  any   Calculation   Date
                    thereafter,  the balance of the  Notional  Account  shall be
                    equal to:

                    A.   the  Notional   Account   Balance  at  the  immediately
                         preceding Calculation Date (the "Preceding  Calculation
                         Date"), plus

                    B.   interest  credited  or debited (as  applicable)  at the
                         Applicable  Rate on the  average  daily  balance of the
                         Notional  Account  during the period from but excluding
                         the  Preceding  Calculation  Date to and  including the
                         Calculation  Date (such period being referred to herein
                         as the "Calculation Period"), plus

                    C.   Reinsurance   Premium   paid   hereunder   during  such
                         Calculation Period, minus

                    D.   Covered Losses paid hereunder  during such  Calculation
                         Period, minus

                    E.   Ceding    Commission   paid   hereunder   during   such
                         Calculation Period, minus

                    F.   111% of the Profit  Commission  paid  hereunder  during
                         such Calculation Period, minus

                    G.   The excess of losses paid by the Reinsurer  pursuant to
                         the Excess of Loss  Agreement  during such  Calculation
                         Period over premium paid to the  Reinsurer  pursuant to
                         the Excess of Loss  Agreement  during such  Calculation
                         Period.

                         For the purpose of calculating the interest referred to
                         in subparagraph B above,  interest shall be credited to
                         or debited from the Notional Account on the last day of
                         each calendar quarter, the Reinsurance Premium shall be
                         credited to the Notional  Account on the date  actually
                         received   by  the   Reinsurer,   as  notified  by  the
                         Reinsurer,  Covered  Losses  paid  hereunder  shall  be
                         debited from the Notional  Account on the date actually
                         paid  by the  Reinsurer,  Ceding  Commission  shall  be
                         debited   from  the   Notional   Account  on  the  date
                         Reinsurance   Premium  is  credited  to  the   Notional
                         Account,  Profit  Commission  shall be debited from the
                         Notional  Account  on the  date  actually  paid  to the
                         Company,  and the excess amount calculated  pursuant to
                         subparagraph G above shall be debited from the Notional
                         Account  on the last day of the  quarter  in which such
                         losses are paid.

                                  Page 14 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

NOTIONAL
ACCOUNT:
(cont'd)            "Applicable  Rate" means the  three-month  treasury rate, as
                    published in the Wall Street Journal.

FUNDING OF
RESERVES:           To the extent  necessary  to provide the Company with credit
                    in all applicable jurisdictions for the reinsurance provided
                    hereunder,  the Reinsurer  will provide,  through the end of
                    the Term,  a letter of  credit or trust  account  containing
                    provisions   acceptable   to  the  Company  and   applicable
                    regulatory  authorities,  in respect of unearned premium (if
                    any),  recoverables,   outstanding  loss  and  loss  expense
                    reserves and any contingency reserves required by applicable
                    regulatory authorities.

REPORTS &
REMITTANCES:        Within 45 days after the end of each calendar  quarter,  the
                    Company will submit to the Reinsurer the following reports:

                    1.   Risk in Force.  Gross  insurance in force for all risk,
                         including  gross risk  outstanding  and gross  unearned
                         premiums thereon,  before any deduction for reinsurance
                         hereunder.

                    2.   Loans in  Default.  The number of loans which have been
                         reported  in  default,  a loan by loan  listing  of the
                         loans which have been  reported  in default,  the total
                         aggregate   principal   balance  of  such  loans,   the
                         origination date of such loans,  the maximum  potential
                         risk for such loans in default,  the reserve before any
                         deduction for reinsurance therefor that the Company has
                         established, and the Reinsurer's share of such reserve.

                    3.   Claims  Received.  The number of loans for which claims
                         have been received (but not paid), the aggregate amount
                         of such claims,  the reserve  therefor that the Company
                         has established  before deduction for reinsurance,  the
                         Reinsurer's  share of such reserve and the  information
                         specified in Schedule 1.

                    4.   Loan  Level  Detail.  A computer  readable  tape in the
                         standard "MICA" format detailing such Quarterly Cycle's
                         lending.

                    5.   Premiums.  A summary of  aggregate  loan  balances  for
                         which  either an initial  premium  or  renewal  premium
                         therefor  was paid to the  Company,  the gross  written
                         premiums and unearned premium reserves.

                                  Page 15 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

REPORTS &
REMITTANCES:
(cont'd)            6.   Reinsurance Premiums. Reinsurance Premiums due from the
                         Company.

                    7.   Reinsurance Claims.  Covered Losses and the amounts, if
                         any, due from the Reinsurer.

                         The balance after offset due to a party by 8. the other
                         party with  respect to any  calendar  quarter  shall be
                         paid (i) if to the  Company,  within 15 days  following
                         the receipt by the  Reinsurer of the  quarterly  report
                         delivered for such calendar  quarter end (ii) if to the
                         Reinsurer, within 45 days after the end of the calendar
                         quarter and as an accompaniment to the quarterly report
                         delivered for such calendar quarter.

EXCLUSIONS:         (i) Pool insurance (other than Co-Primary  Insurance),  (ii)
                    assumed  reinsurance,  (iii) business insured by the Company
                    other than the Covered  Business,  (iv) bad faith,  punitive
                    damages or other extracontractual liability asserted against
                    the Company, its officers,  directors,  employees or agents,
                    (v) any payment by the Company in excess of its  contractual
                    obligations  under a Master Policy or Certificate,  and (vi)
                    unallocated  office  expenses of the Company and salaries of
                    officials and employees of the Company.

                    "Co-Primary   Insurance"  means  "modified"  pool  insurance
                    issued by an insurer  which  covers  loans  with  respect to
                    which such insurer has issued a primary  policy.  Co-Primary
                    Insurance  has  the  following   characteristics:   (i)  the
                    coverage  percentages are 16% for 95% LTV loans, 12% for 90%
                    LTV loans and 6% for 85% LTV loans and (ii) it is  available
                    to pay up to an  additional  60% over the  primary  coverage
                    level up to a  cumulative  total  of  1.75% of the  original
                    amount of insurance written.

COVENANTS:          The Company  shall take all  necessary  actions to prudently
                    manage the Covered Business and the Covered Losses.

                                  Page 16 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

OTHER
PROVISIONS:         Except  as  otherwise  provided,  the  reinsurance  will  be
                    subject to the terms, conditions, interpretations,  waivers,
                    modifications  and alterations of the Certificates  included
                    in the Covered  Business.  The  definitive  agreement  shall
                    contain the following general terms.

                    Insolvency Clause
                    Arbitration Clause (final and binding; North Carolina)
                    Entire Agreement/Amendments Clause
                    Taxes Clause
                    Access to Records  (Company has right to  approve/disapprove
                      of third party representatives of the Reinsurer;  provided
                      the Company must act reasonably; provided further that, if
                      the Company disapproves of a  representative,  the Company
                      must  provide the Reinsurer  with the names of  acceptable
                      alternatives)
                    Loss Notices and Settlements Clause
                    Delays, Errors and Omissions Clause
                    Offset  Clause (both within the  Agreement  and between this
                      Agreement and the Excess of Loss Agreement)
                    Definitions Clause
                    Salvage Clause
                    Service of Suit Clause
                    Governing Law Clause (New York)
                    Currency (US Dollars) Clause
                    Confidentiality   Clause  (relating  to  loan  level  detail
                      provided in MICA format)
                    Aon Re Inc. Intermediary Clause


                                  Page 17 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)


You have already  provided  written  authorization  based on the terms set forth
hereon. Please formalize your acceptance and approval by signing and returning 1
copy of this Placement Slip to Aon Re Inc.


REINSURER:
          ----------------------------------------------------------------------

THRU:
      --------------------------------------------------------------------------

SIGNED                                        REFERENCE
LINE:                                         NUMBER:
      ---------------------------------------           ------------------------

ACCEPTED &
APPROVED BY:                                    DATE:
            ------------------------------------     ---------------------------

(For  processing  purposes  it is  important  that you  provide  your  Company's
reference number for this program.)


                                 Page 18 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX A
                                    (cont'd)

                                   SCHEDULE 1


DEFAULT AND CLAIM DATA

                    o    CERTIFICATE NUMBER
                    o    POLICY STATUS (Inforce, canceled, expired)
                    o    OUTSTANDING PRINCIPAL BALANCE (UPB)
                    o    DELINQUENCY FLAG
                    o    DATE LAST PAID INSTALLMENT
                    o    CURE DATE
                    o    FORECLOSURE FLAG
                    o    FORECLOSURE SALE DATE
                    o    CLAIM RECEIVED DATE
                    o    CLAIM SETTLEMENT AMOUNT
                    o    CLAIM SETTLEMENT DATE

REAL ESTATE OWNED (REO) DATA

                    o    INVENTORY FLAG
                    o    LIST PRICE
                    o    SALE PRICE
                    o    NET PROCEEDS OF SALE
                    o    SETTLEMENT DATE

The above  information  will be in  standard  MICA  format  and will  append the
original MICA database of insured loans.

                                 Page 19 of 20
<PAGE>

TRIAD GUARANTY INSURANCE CORPORATION                              EXCESS OF LOSS


                                   APPENDIX B


DEFAULT AND CLAIM DATA

                    o    CERTIFICATE NUMBER
                    o    POLICY STATUS (Inforce, canceled, expired)
                    o    OUTSTANDING PRINCIPAL BALANCE (UPB)
                    o    DELINQUENCY FLAG
                    o    DATE LAST PAID INSTALLMENT
                    o    CURE DATE
                    o    FORECLOSURE FLAG
                    o    FORECLOSURE SALE DATE
                    o    CLAIM RECEIVED DATE
                    o    CLAIM SETTLEMENT AMOUNT
                    o    CLAIM SETTLEMENT DATE

REAL ESTATE OWNED (REO) DATA

                    o    INVENTORY FLAG
                    o    LIST PRICE
                    o    SALE PRICE
                    o    NET PROCEEDS OF SALE
                    o    SETTLEMENT DATE


The above  information  will be in  standard  MICA  format  and will  append the
original MICA database of insured loans.

                                  Page 20 of 20