The "BB+" rating is considered one notch below investment grade, or “junk” status.
S&P also cut the counterparty and financial strength ratings of Radian's operating subsidiaries to "BBB+" from "A." The new ratings for the subsidiaries are still considered investment grade.
The ratings reductions are considered as part of broader downgrades of mortgage insurers. S&P cut the ratings after downgrading its forecast in the S&P/Case Shiller Home Price Index, rising unemployment and projected claims payments for 2008 vintage mortgages.
S&P now projects the home price index will fall 29 percent from its peak to its valley, a significant change from it previous projection of 20 percent.
S&P believes that growing unemployment, which it says serves to drive mortgage defaults and thus claims payments, also will hinder mortgage insurers' ability to generate a profit.
Based on continued weakness in the housing market and recent data on early payment defaults, S&P increased its claim rate estimate for 2008 vintage mortgages to 7 percent from 6.5 percent.
S&P did say it believes mortgage insurers' near-term ability to pay claims remains strong.
The outlook on Radian's ratings is negative, meaning that there is a 33 percent chance of another downgrade over the next two years.