Triad Guaranty (TGIC) CORRESP Correspondence with SEC

Triad Guaranty Inc.
101 South Stratford Road
Winston-Salem, NC 27104

March 23, 2007

Mr. Jim B. Rosenberg
Senior Assistant Chief Accountant
United States Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 03-09
450 Fifth Street, N.W.
Washington, DC 20549

Re: Triad Guaranty Inc.
Form 10-K for the Year Ended December 31, 2005
File No. 000-22342

Dear Mr. Rosenberg:

We respectively submit the following in response to our telephone conversation on Friday, March 9, 2007 with Ms. Kei Ino in which she sought further clarification on information contained in our response dated January 31, 2007 (our “initial response”). Where relevant I have included our initial response below and highlighted changes to our response through the use of underlines. Unless otherwise indicated I have not included the Appendices referenced in our initial response.

Form 10-K for the Year Ended December 31, 2005

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 30

Losses and Expenses, page 38

1. In a disclosure-type format, please tell us the method you utilize to calculate the loss reserve for defaults incurred but not reported. For example, we understand that some companies may calculate this reserve by estimating the ultimate unpaid liability first and then reducing that amount by cumulative paid claims and by case reserve for reported defaults, but there may be other methods as well.

Mortgage insurers are not permitted under generally accepted account principles to reserve for anticipated or projected future claims not

-1-

associated with an actual default. We provide case based reserves on all reported defaults. Consistent with industry practice, we define a default as a loan that is reported to us as delinquent in excess of two payments at the reporting date and all reported delinquencies that were previously in excess of two payments past due and have not been brought current.In addition, we provide an incurred but not reported reserve for loans that are in excess of two payments past due at the reporting date that have not been reported to us as a default by a servicer or lender prior to the reporting date. The reserve for incurred but not reported defaults is estimated as a percentage of our actual reported defaults, based on historical analysis.In the Critical Accounting Policies section of Management Discussion and Analysis in our 10-K for the year ended December 31, 2006, we have included additional disclosure related to the method used to estimate the reserve for incurred but not reported defaults.

2. In order to show investors the potential variability in the most recent estimate of your loss reserve, quantify and present, preferably in a tabular format, the impact that reasonably likely changes in default rate, claim rate, and severity may have on reported results, financial position and liquidity. Explain why management believes the scenarios quantified are reasonably likely.

In our response dated January 31, 2007 we included the draft language and format for the disclosure related to reasonably likely changes from the frequency rate and severity rates incorporated in our reserve for losses that was to be included in our Annual Report onForm 10-K for the year ended December 31, 2006. In our initial response we used the wording “reasonably possible” but the actual wording used in filedForm 10-K was changed to “reasonably likely”. The additional disclosure begins on page 29 of ourForm 10-K for the year ended December 31, 2006.

Consolidated Financial Statements, page 61

Report of Independent Registered Public Accounting Firm, page 61

3. Please provide an audit report that is signed by your independent registered public accounting firm and confirm that you will include a signed report in your future filings whenever an audit report is required.

No change from our initial response

Notes to Consolidated Financial Statements, page 66

Note 4. Reserve For Losses and Loss Adjustment Expenses, page 74

-2-

4. It appears that you have significantly revised your provision for losses of insured events of prior years in 2005 and 2004. The 2004 and prior deficiency recognized in 2005 of $24 million represents 69% of the reserve for losses at December 31, 2004. The current disclosure does not fully explain the reasons these amounts could not be identified in earlier periods. Please provide the following to explain the reasons for your change in estimate for 2005 and 2004:

a.	Identify and describe in reasonable specificity the nature and extent of a) new events that occurred or b) additional experience/information obtained since the last reporting date that led to the change in estimates.
b.	Ensure your disclosure clarifies the timing of the change in estimate such as why recognition occurred in the periods that it did and why recognition in earlier periods was not required.

Address the following in your explanation:

i.	Explain how you use information obtained after the date of the financial statement in estimating reserves, for example, how you used information available in the first two months of 2004 in assessing reserves necessary at December 31, 2003 in estimating claim severity that had increased during the fourth quarter of 2003.
ii.	You refer to “loss mitigation efforts” related to loans in default at December 31, 2004. More fully explain what mitigation efforts took place, when they took place and if they took place before, during or after you noticed the higher severity trend.
iii.	Explain why a greater proportion of defaults existing at December 31, 2004 developed into pending and paid claims and why this could not be anticipated in reserving for 2004.
iv.	You state a claims backlog resulted in 2005 from the increase in pending claims. State when the backlog began, how you accounted for reserves related to the backlog, and what the claims backlog and backlog reserve was at December 31, 2004 and for each quarter ending in the year ended December 31, 2005.
v.	The explanation of the above should explain the loss ratios in each quarter. We note the loss ratios ranged from 23% to 27% for the five quarters ended March 31, 2005 then increased to 42% in the second quarter of 2005, declined to 38% in the third quarter of 2005, and increased to 49% in the fourth quarter of 2005.

Our reserve for losses is established by applying factors, developed using historical experience and adjusted for current economic conditions, to loans reported in default, and estimates of loans in default that are in the process of being reported to the Company. The default inventory is segmented into groupings with similar criteria (as identified in response to comment 2. above) to improve the predictability of the factors used in the loss reserve estimate. The reserves established represent our best estimate of the future cost of settlement of claims from the default inventory, using all relevant information available to us at the time the reserves were established.

-3-

The reserve for losses at December 31, 2004 was $34 million. Through December 31, 2005, we paid $46 million in losses and loss adjustment expenses for defaults existing at December 31, 2004, and had remaining reserves of $12 million on loans in default existing at December 31, 2004, which continued in default at December 31, 2005. As a result, through December 31, 2005, the total amount paid and reserved for defaults existing at December 31, 2004 was $58 million compared to a reserve at December 31, 2004 of $34 million, resulting in a deficiency of $24 million. The majority of the deficiency was generated from a higher than expected frequency of paid claims emerging from the default inventory, although there was a secondary impact on the deficiency from an increase in the frequency factors applied to the defaults remaining at December 31, 2005.

Actual experience has shown that the frequency factors, calculated from our historical data through December 31, 2004, understated the volume of claims that ultimately would be filed and paid in 2005 on defaults existing at December 31, 2004. On a quarterly basis, filed claims were relatively level throughout 2004 and through the first quarter of 2005, as illustrated in Appendix A. During the second quarter of 2005, filed claims increased significantly above historical levels. This increase in filed claims produced a higher rate of claim payments than implied by the frequency factors used in calculating the reserves for losses at December 31, 2004. The primary cause for the increase in the filed and paid claims during the second quarter of 2005 was the action of a major customer to accelerate its claim filing process, as well as appeal decisions with respect to certain claims previously denied or rescinded. The increase in the paid claims trend was new information we incorporated in our reserve calculations, resulting in a greater increase in loss reserves in the second quarter of 2005 (Appendix D1). The change in estimate for claim frequency increased the reserve for losses, and the deficiency from the December 31, 2004 reserves for losses, for all defaults existing at December 31, 2004 that were still classified as defaults at December 31, 2005. [Addresses 4a. and 4b.iii and partially 4b.v.]

Concurrent with the increase in filed claims in the second quarter of 2005, the severity of paid claims increased significantly during the quarter. In the normal course of the claims payment cycle, our ultimate loss is frequently reduced by loss mitigation. The most common mitigation opportunity is for the property to be soldby the borrower prior to foreclosure, or the lender after foreclosure butbefore we are contractually required to pay a claim under the terms of the policy. In many cases, the sales price of the property is sufficient to reduce, and sometimes eliminate, our loss. Because of the volume of filed claims in the second quarter of 2005,and customer expectations related to faster processing of filed claims, our ability to reduce our losses through mitigation was diminishedbeginning the second quarter of 2005. As illustrated in Appendix B, this caused an increase in the severity of paid claims beginning in the second quarter of 2005 over our historical severity rates, increasing the deficiency from the December 31, 2004 reserve for losses. As a result of staff additions, system improvements,

-4-

and changes in mitigation practices to purchase more properties, we improved our loss mitigation results and decreased our pending claims over the balance of 2005, as illustrated in Appendix C.Appendix G included with this response provides detail of our real estate owned (“REO”) program for properties in our REO inventory at December 31, 2005 and December 31, 2006, and all purchase and sale transactions during 2006. [Addresses 4b.ii]

Prior to 2006, our claims settlement process included a quality assurance review of the underwriting and loan origination process on most filed claims. As our business grew, the quality assurance review began to slow down the claims settlement process, resulting in an increase in pending claims throughout 2004, also as illustrated in Appendix C. The increase in pending claims was exacerbated by the increase in the filed claims in the second quarter of 2005. Prior to 2006, our reserve calculation did not include a separate segment for pending claims and our frequency factors incorporated an assumed mix of pending claims into the overall frequency factor for each segment. We were aware that, when a change in the mix towards more pending claims occurs, our historical reserve factors had the potential to understate reserves. Therefore, in calculating the reserve for losses, consideration was given to the level of pending claims, even though they were not included as a separate segment. Historically this judgmental process was considered to be appropriate due to the relative stability of the level of pending claims within the inventory of defaults. However, because of the volatility experienced in the level of pending claims in recent periods, during 2006 we changed our reserve estimation process to treat pending claims as a separate segment with its own frequency factor. We believe the addition of a pending claim segment provides a better estimate of a key event in the loss recognition cycle. [Addresses 4.b.iv.]

Appendix D provides information on the components of the incurred losses and loss ratio for the 2004 and 2005 quarters. Incurred losses and the loss ratio reflect both paid claims and the change in the reserve for losses. The incurred loss ratio is subject to greater variability than the actual paid claim ratio due to the impact of the change in reserves that occurs when reserve factors are adjusted. In a quarter where frequency and/or severity factors are changed, the change in reserves is a multiple of the change that would have occurred absent adjustments to the reserve factors. During the second quarter of 2005, the loss ratio increased to 42% due to the combination of the high level of paid claims and a larger than historical reserve increase. As previously noted, we had a significantly higher than normal level of filed and paid claims in the second quarter, which impacted both the dollar amount of paid claims and the increase to the reserve for losses during the second quarter. During the fourth quarter of 2005 the loss ratio increased to 49% due to a $9.3 million increase in our reserve for losses. The increase in the reserve for losses was due to the combination of increased defaults from the impact of the 2005 hurricane season and an adjustment to the estimates for loss reserves in response to 2005 experience. [Addresses 4b.v.]

-5-

We monitor our reserve development on a quarterly basis to assess the reasonableness of the estimate of the reserve for losses. When we observe development trends that indicate the actual experience is developing differently from our estimates, we analyze the cause of the differences and determine what, if any, changes are necessary in our reserve estimation process. These changes are then incorporated in our reserve estimation process by updating the frequency and severity factors quarterly. While we review monthly information, it is difficult to draw meaningful conclusions from this data due to the volatility exhibited in a single month, and the length of the development period of the reserve for losses. [Addresses 4.b.i]

During 2006, the December 31, 2005 reserve for losses showed a minor deficiency for the quarter ended March 31, 2006, however, the deficiency increased substantially at the end of the second quarter of 2006. As a result of this new information, we adjusted our reserve segmentation during the third quarter of 2006 to improve the alignment of reserve factors with the profile of the inventory of defaults. Based on the changes made through the end of the third quarter, we believed the changes in estimates had substantially addressed the causes of the deficiency against the December 31, 2005 reserve for losses. However, during the fourth quarter of 2006, we had a significant increase in our paid loss severity due, we believe, to changes in the housing market, which resulted in our actual paid loss severity being in excess of the severity assumptions used to calculate the reserve for losses. Additional information on the cause of the changes in the fourth quarter 2006 severity, and the resulting change in the estimate of reserve for losses, is included in our Form 8-K filed January 25, 2007, which includes our fourth quarter 2006 earnings release and supplemental financial information for the quarter. (Attached as Appendix F).

For claims paid during the fourth quarter 2006 that were in default at December 31, 2005, the higher severity increased the deficiency against the December 31, 2005 reserve for losses. As a result of the higher paid claim severity experienced during the fourth quarter, the severity factors used in estimating the December 31, 2006 reserve for losses were increased. The increase in the reserve for losses also increased the deficiency against the December 31, 2005 reserve for losses for any defaults in the December 31, 2006 default inventory that also existed at December 31, 2005. As a result of the 2006 actual experience and changes in estimates for the reserve for losses during 2006, our financial statements for the period ended December 31, 2006 will report a deficiency against the December 31, 2005 reserve for losses of approximately $24 million.

We expanded our discussion of the methodology used for the calculation of the reserve for losses, and the reasons underlying the changes in estimate used in the calculation of the reserve for losses, on pages 40 through 45 of our 10-K for the year ended December 31, 2006. In addition, in the same section we provided

-6-

information on the reasons for the relatively large fourth quarter change in reserves for both 2005 and 2006.

We confirm and acknowledge that:

• we are responsible for the adequacy and accuracy of the disclosure in our filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

• we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

If you have any questions concerning our response, please do not hesitate to contact me at (336) 723-1282, extension 1105 or contact Earl Wall, our general counsel, at extension 1108.

Sincerely,

/s/ Kenneth W. Jones

Kenneth W. Jones
Senior Vice President and Chief Financial Officer

-7-

Appendix G

Triad Guaranty Inc. Rollforward of Real Estate Owned
For Properties Acquired in 2005 and 2006

				Properties Owned at December 31, 2005							2006 ACTIVITY
									Adjusted								Adjusted						Gain			Adjusted
				Total					Book								Cost						(Loss)			Book
		Acquisition		Cost in					Value		Original	Supplemental					at		Disposal		Sale		From			Value
City	State	date		Property		Impairments			12/31/2005		Cost	Costs		Impairments			Disposal		date		Proceeds		Sale			12/31/2006
						(a)						(b)		(a)									(c)
Webb City	MO		4/15/2005	$	91,680		($15,193	)	$	76,487					($7,115	)	$	69,372		07/24/06	$	68,147		($1,225	)
Duncanville	TX		5/4/2005		99,611		(3,011	)		96,600					(9,000	)		87,600		05/10/06		83,413		(4,187	)
Pearland	TX		6/10/2005		191,345		(16,545	)		174,800					(21,864	)		152,936		04/18/06		149,518		(3,418	)
Atlanta	GA		6/16/2005		193,647		(18,939	)		174,708					(6,728	)		167,980		04/27/06		164,700		(3,280	)
Houston	TX		7/13/2005		80,114		(11,560	)		68,554								68,554		01/04/06		64,770		(3,784	)
New Virginia	IA		7/19/2005		81,920		(10,363	)		71,557			1,766					73,323		02/07/06		67,641		(5,682	)
Brighton	MI		7/22/2005		110,515		(16,675	)		93,840					(10,723	)		83,117		09/20/06		78,968		(4,149	)
Kansas City	KS		8/19/2005		69,037		(11,077	)		57,960					(23,850	)		34,110		10/03/06		31,382		(2,728	)
Norcross	GA		8/22/2005		125,331		(14,931	)		110,400					(2,574	)		107,826		10/10/06		99,079		(8,747	)
Conyers	GA		8/22/2005		94,233		(2,233	)		92,000								92,000		04/04/06		95,045		3,045
Ooltewah	TN		8/26/2005		190,551		(20,351	)		170,200					(9,780	)		160,420		05/03/06		157,122		(3,298	)
Florissant	MO		8/29/2005		88,637		(1,237	)		87,400			1,372		(9,280	)		79,492		04/24/06		78,570		(921	)
Macon	GA		9/1/2005		87,024		(8,824	)		78,200					612			78,812		04/24/06		77,062		(1,750	)
Riverdale	GA		9/2/2005		78,934		0			78,934					(8,174	)		70,760		04/13/06		70,951		191
Ypsilanti	MI		9/16/2005		177,170		(43,160	)		134,010					(4,605	)		129,405		07/11/06		124,332		(5,073	)
Riverdale	GA		9/26/2005		139,271		0			139,271					(951	)		138,320		12/05/06		133,829		(4,491	)
Royse City	TX		9/26/2005		125,880		(17,780	)		108,100					77			108,177		04/03/06		106,178		(1,999	)
Douglasville	GA		9/28/2005		99,168		(3,580	)		95,588								95,588		01/24/06		97,766		2,178
Nashville	TN		10/11/2005		187,485		(3,485	)		184,000					(1,498	)		182,502		05/03/06		179,517		(2,985	)
Longmont	CO		10/12/2005		167,625		(11,317	)		156,308					1,792			158,100		03/02/06		156,570		(1,530	)
The Woodlands	TX		10/18/2005		113,160		(1,560	)		111,600								111,600		01/18/06		107,415		(4,185	)
Charlotte	NC		10/18/2005		100,879		0			100,879								100,879		04/27/06		101,525		645
Arlington	TX		10/19/2005		84,565		0			84,565			3,804					88,369		05/02/06		88,957		588
Lawrenceville	GA		10/28/2005		126,918		(9,841	)		117,077								117,077		01/05/06		116,702		(375	)
Grand Prairie	TX		10/28/2005		132,641		(259	)		132,382					(12,282	)		120,100		05/08/06		116,141		(3,959	)
Dacula	GA		10/28/2005		154,855		(38,048	)		116,807								116,807		01/30/06		116,260		(547	)
Henderson	TX		10/28/2005		90,509		(6,809	)		83,700			2,578					86,278		01/31/06		81,918		(4,360	)
El Paso	TX		10/28/2005		41,780		0			41,780								41,780		03/31/06		38,474		(3,306	)
Stockbridge	GA		10/28/2005		204,846		(25,446	)		179,400			4,175		(21,635	)		161,940		08/18/06		162,139		199
Houston	TX		10/28/2005		132,428		(17,428	)		115,000					1,142			116,142		03/24/06		113,934		(2,208	)
Lilburn	GA		11/8/2005		175,241		(34,481	)		140,760			5,652		(2,460	)		143,952		04/03/06		139,194		(4,758	)
Cordova	TN		11/9/2005		158,756		(13,396	)		145,360					(10,150	)		135,210		10/13/06		132,569		(2,641	)
Marysville	OH		11/9/2005		171,615		(19,815	)		151,800			1,911		(15,970	)		137,741		06/15/06		133,447		(4,295	)
New Athens	IL		11/9/2005		71,965		0			71,965			1,087					73,052		07/07/06		72,385		(666	)
Garland	TX		11/17/2005		177,131		(22,111	)		155,020			1,259		(465	)		155,814		05/02/06		146,512		(9,302	)
Newport	MI		11/17/2005		127,550		0			127,550			3,233		(20,764	)										$	110,019
Riverdale	GA		11/17/2005		114,716		(12,859	)		101,857								101,857		02/02/06		101,154		(703	)
Mansfield	GA		11/16/2005		103,061		(1,861	)		101,200			1,010		(3,760	)		98,450		04/24/06		97,116		(1,334	)
McDonough	GA		11/17/2005		172,559		(25,359	)		147,200			1,819		(16,829	)		132,190		10/03/06		126,924		(5,266	)
Lithonia	GA		11/30/2005		127,943		(5,251	)		122,692			1,325		(4,512	)		119,505		06/02/06		117,114		(2,391	)
Troy	MI		11/30/2005		143,530		(21,630	)		121,900			2,151		(16,489	)											107,562
Lake Wylie	SC		11/30/2005		202,594		(12,177	)		190,418								190,418		01/18/06		188,073		(2,344	)
Garden City	MI		11/30/2005		126,580		(9,280	)		117,300			2,422		(15,072	)											104,650
Katy	TX		12/5/2005		118,301		(2,796	)		115,505								115,505		01/31/06		110,762		(4,743	)
Memphis	TN		12/5/2005		190,933		(13,373	)		177,560			2,987					180,547		04/27/06		160,861		(19,687	)
Montgomery	AL		12/5/2005		230,326		(28,156	)		202,170			421		(32,579	)		170,012		11/09/06		166,621		(3,390	)
Maysville	KY		12/5/2005		69,709		(1,629	)		68,080					(2,050	)		66,030		07/13/06		64,653		(1,377	)
Gastonia	NC		12/29/2005		146,317		(15,677	)		130,640					210			130,850		06/08/06		129,094		(1,756	)
				$	6,290,585		($569,501	)	$	5,721,084

(a)	Represents write-downs to net realizable value, principally recognized at the time property was acquired. Impairments are reflected as paid claims in the financial statememts.
(b)	Supplement costs (legal fees, etc.) association with the property acquisition that are required to be paid under the terms of our policies.
(c)	Gain or loss from sale recorded as paid claims in the financial statements

Page 1 of 4

Appendix G

Triad Guaranty Inc. Rollforward of Real Estate Owned
For Properties Acquired in 2005 and 2006

				Properties Owned at December 31, 2005			2006 ACTIVITY
						Adjusted								Adjusted							Gain			Adjusted
				Total		Book								Cost							(Loss)			Book
		Acquisition		Cost in		Value	Original		Supplemental					at		Disposal		Sale			From			Value
City	State	date		Property	Impairments	12/31/2005	Cost		Costs		Impairments			Disposal		date		Proceeds			Sale			12/31/2006
Richmond	TX		1/5/2006					161,133		2,471		(35,931	)		127,673		10/05/06		122,852			(4,821	)
San Antonio	TX		1/5/2006					100,490		3,271		(3,146	)		100,615		08/04/06		96,990			(3,625	)
Columbus	OH		1/5/2006					75,947		984		(2,461	)		74,470		09/05/06		71,011	��		(3,459	)
Farmington Hills	MI		1/5/2006					178,291		4,562					182,854		06/15/06		181,912			(942	)
Davenport	FL		1/5/2006					102,376		3,851		(16,389	)		89,838		07/19/06		86,993			(2,845	)
Snellville	GA		1/5/2006					152,770				(305	)		152,465		08/04/06		150,009			(2,456	)
Spring	TX		1/5/2006					170,706		6,454		(16,295	)		160,865		09/20/06		151,355			(9,510	)
Taylor	MI		1/5/2006					64,165		4,173															68,337
Minneapolis	MN		1/5/2006					141,609		1,969		(70,869	)												72,709
Country Club Hills	IL		1/5/2006					131,323		3,264		0			134,588		10/03/06		128,310			(6,277	)
Antioch	IL		1/5/2006					127,741		2,285		(7,266	)		122,760		06/13/06		117,048			(5,712	)
Cleveland	MS		1/10/2006					91,667		2,281		(14,128	)												79,820
Dallas	TX		1/10/2006					186,658		7,383		(28,151	)		165,890		05/09/06		161,918			(3,972	)
Colorado Springs	CO		1/10/2006					195,073		9,027		(30,818	)		173,282		03/02/06		170,815			(2,467	)
Indianapolis	IN		1/10/2006					51,188		3,734		(14,973	)												39,949
Fenton	MO		1/10/2006					193,384				0			193,384		05/08/06		212,637			19,253
Durham	NC		1/10/2006					130,565		2,531		(7,152	)		125,944		07/25/06		119,726			(6,218	)
Oklahoma City	OK		1/11/2006					134,670		1,870		0			136,540		08/15/06		136,326			(213	)
Houston	TX		1/11/2006					125,384				(24,204	)		101,180		03/28/06		93,582			(7,598	)
Woodland Park	CO		1/11/2006					148,480				(2,749	)		145,731		06/01/06		144,185			(1,546	)
East Stroudsburg	PA		1/11/2006					245,377		1,076		(31,827	)		214,626		06/05/06		212,934			(1,692	)
Lake in the Hills	IL		1/11/2006					276,199		16,904		(17,243	)		275,860		09/05/06		263,621			(12,239	)
Ellenwood	GA		1/11/2006					93,445		13,375		(10,361	)		96,460		07/24/06		91,438			(5,022	)
High Point	NC		1/19/2006					110,438		4,869		(14,057	)		101,250		10/11/06		99,644			(1,606	)
Tulsa	OK		1/19/2006					188,214		2,546		(23,109	)		167,650		10/10/06		164,371			(3,279	)
Whiteland	IN		1/19/2006					148,767		5,504		(33,221	)		121,050		12/18/06		113,300			(7,750	)
Plano	TX		2/10/2006					210,530		8,508		(14,438	)		204,600		04/12/06		201,149			(3,451	)
Wickliffe	OH		2/10/2006					115,680				(20,929	)		94,751		08/07/06		92,223			(2,528	)
Hobart	IN		2/10/2006					153,609		2,235		(983	)		154,860		06/07/06		150,536			(4,324	)
Copperhill	TN		2/10/2006					134,506				(26,796	)		107,710		11/03/06		105,701			(2,009	)
Falkville	AL		2/16/2006					51,506							51,506		08/02/06		64,063			12,557
Aurora	CO		2/16/2006					201,754		612		(24,097	)												178,269
Hiram	GA		2/16/2006					73,874		1,482					75,355		10/05/06		77,080			1,725
Aurora	CO		2/27/2006					174,688				(41,009	)												133,679
Powder Springs	GA		2/27/2006					175,119		1,074		(10,218	)		165,975		07/05/06		164,677			(1,298	)
Louisville	KY		2/28/2006					102,567				(18,870	)		83,697		09/12/06		82,415			(1,282	)
Dallas	TX		2/28/2006					94,475		2,794															97,269
Longmont	CO		2/28/2006					225,559		6,036		(22,985	)		208,610		07/07/06		204,714			(3,896	)
Hampton	GA		3/2/2006					142,631		2,040		(12,387	)		132,283		06/22/06		130,916			(1,367	)
Spring Hill	TN		3/3/2006					138,427				0			138,427		04/21/06		142,662			4,234
Spring	TX		3/6/2006					115,516		436		(15,062	)		100,890		08/16/06		97,767			(3,123	)
Angier	NC		3/7/2006					98,256		25		(12,355	)		85,925		04/25/06		85,107			(818	)
Brazoria	TX		3/7/2006					89,733		1,330		(18,117	)		72,946		07/24/06		71,486			(1,460	)
Newton	NC		3/7/2006					154,061		1,356		(17,127	)		138,290		08/03/06		137,046			(1,244	)
Mauldin	SC		3/8/2006					166,751		3,063		(31,529	)		138,285		07/26/06		134,270			(4,015	)
Mount Washington	KY		3/10/2006					180,865		2,224		(34,289	)		148,800		06/07/06		147,527			(1,273	)
Machesney Park	IL		3/27/2006					105,716		1,739		0			107,455		07/01/06		108,669			1,214
San Antonio	TX		4/3/2006					175,564				0			175,564		06/02/06		183,184			7,620
Tucker	GA		4/3/2006					137,588		2,999		(17,137	)		123,450		11/28/06		121,846			(1,604	)
Choctaw	OK		4/3/2006					161,163				(6,099	)		155,064		06/02/06		154,179			(885	)
Lees Summit	MO		4/3/2006					193,516				(26,331	)		167,185		06/09/06		166,151			(1,034	)
Louisville	KY		4/4/2006					221,173		10,308		(45,386	)												186,095
Big Spring	TX		4/4/2006					36,020		894		(2,854	)		34,060		07/12/06		32,309			(1,751	)
Raleigh	NC		4/4/2006					381,694				0			381,694		06/27/06		418,371			36,677
Lakewood	OH		4/4/2006					125,558				(7,531	)												118,027
Floresville	TX		4/5/2006					185,000		1,907		0			186,906		10/20/06		193,813			6,907
Simpsonville	SC		4/5/2006					153,530				0			153,530		08/24/06		152,690			(840	)

Page 2 of 4

Appendix G

Triad Guaranty Inc. Rollforward of Real Estate Owned
For Properties Acquired in 2005 and 2006

				Properties Owned at December 31, 2005			2006 ACTIVITY
						Adjusted								Adjusted						Gain			Adjusted
				Total		Book								Cost						(Loss)			Book
		Acquisition		Cost in		Value	Original		Supplemental					at		Disposal		Sale		From			Value
City	State	date		Property	Impairments	12/31/2005	Cost		Costs		Impairments			Disposal		date		Proceeds		Sale			12/31/2006
Omaha	NE		4/5/2006					125,649		597		(11,331	)		114,915		07/24/06		112,143		(2,772	)
Jonesboro	GA		4/5/2006					118,931		495		(7,598	)		111,828		09/18/06		110,656		(1,172	)
Urbandale	IA		4/5/2006					185,564		679		(33,693	)		152,550		10/11/06		148,749		(3,801	)
Canton	SD		4/6/2006					63,944		2,343		(7,228	)											59,059
Houston	TX		4/6/2006					87,104		25,021		(2,606	)		109,519		05/26/06		113,347		3,828
Carrollton	TX		4/10/2006					183,887		4,347		(24,994	)		163,240		07/03/06		158,792		(4,448	)
Marble Hill	MO		4/10/2006					75,187		1,425		(6,997	)											69,615
Poplar Grove	IL		4/11/2006					153,308		652		(8,163	)		145,797		05/25/06		150,436		4,639
St. Paul	MN		4/12/2006					164,652		6,173		(27,136	)											143,689
Lansdowne	PA		4/27/2006					174,608		853		0			175,461		07/25/06		175,473		11
Desoto	TX		5/16/2006					142,369		4,567														146,936
Choctaw	OK		6/16/2006					268,214		650		(45,550	)		223,314		07/31/06		235,289		11,975
Clarksville	TN		6/19/2006					102,783		1,060		0			103,843		11/07/06		112,708		8,864
Katy	TX		6/26/2006					155,190		2,895		0			158,086		10/12/06		168,683		10,597
Shreveport	LA		6/28/2006					61,264				0			61,264		08/23/06		65,870		4,606
Cordova	TN		6/28/2006					141,137				(36,197	)											104,940
Saint Petersburg	FL		6/30/2006					136,696																136,696
Clever	MO		7/14/2006					83,498		3,027		0			86,525		10/04/06		87,207		682
Midwest City	OK		7/14/2006					148,783		905		(12,576	)		137,111		11/07/06		134,572		(2,539	)
Snellville	GA		7/27/2006					136,053				(8,458	)		127,595		10/03/06		126,205		(1,390	)
Charlestown	WV		8/1/2006					394,927				(57,772	)											337,155
Rock Hill	SC		8/11/2006					127,666		910		(5,535	)		123,041		12/01/06		121,037		(2,004	)
Memphis	TN		8/10/2006					119,853																119,853
Friendswood	TX		8/14/2006					113,930		1,051														114,981
Lee’s Summit	MO		8/21/2006					252,276		2,382														254,658
Zion	IL		8/23/2006					208,019		5,763		(45,887	)											167,895
Kingwood	TX		8/28/2006					137,277		1,969		(15,942	)											123,305
Gaffney	SC		8/28/2006					147,171		1,097		(16,318	)											131,950
Atlanta	GA		8/31/2006					301,652		10,502		(30,054	)											282,100
Camdenton	MO		8/31/2006					105,686																105,686
Coon Rapids	MN		8/31/2006					135,740		485		(16,332	)											119,893
Cumberland City	TN		8/31/2006					91,604		334		(8,218	)											83,720
Montgomery	TX		9/8/2006					197,309		1,142														198,451
Manassas	VA		9/12/2006					275,393		518														275,911
Florissant	MO		9/14/2006					127,384				(11,814	)											115,570
Winston Salem	NC		9/14/2006					99,464				(8,555	)											90,909
Corpus Christi	TX		9/25/2006					158,044				(4,254	)											153,790
Troy	OH		9/28/2006					186,327		2,556		(32,363	)											156,520
Houston	TX		9/29/2006					120,097		6,473														126,570
Houston	TX		9/29/2006					126,268				(8,423	)											117,845
Martinsville	IN		10/6/2006					67,760		1,784		(6,299	)											63,245
North Richland Hills	TX		10/6/2006					243,609		247		(22,725	)											221,130
College Park	GA		10/6/2006					62,847				(3,015	)											59,833
Clayton	NC		10/12/2006					211,358		2,070		(38,935	)											174,493
Lawtey	FL		10/16/2006					92,233		250														92,483
Addison	IL		10/18/2006					96,721		1,985		(1,336	)											97,370
Port Lavaca	TX		10/19/2006					88,450																88,450
Mission	TX		10/20/2006					130,167		724					130,891		12/12/06		132,012		1,121
Lilburn	GA		10/20/2006					246,936		791		(21,137	)											226,590
Rockford	MI		10/27/2006					155,383		189		(5,422	)											150,150
Sagamore Hills	OH		10/31/2006					126,133				(12,838	)											113,295
Fayetteville	TN		10/31/2006					87,953				(12,650	)											75,303
Jacksonville	FL		10/31/2006					210,906				(16,621	)											194,285
Birmingham	AL		11/2/2006					289,938																289,938
Arlington	TX		11/3/2006					163,431				(6,251	)											157,180
Arlington	TX		11/3/2006					93,560				(14,845	)											78,715
Oskhosh	WI		11/3/2006					67,940				(11,156	)											56,784

Page 3 of 4

Appendix G

Triad Guaranty Inc. Rollforward of Real Estate Owned
For Properties Acquired in 2005 and 2006

				Properties Owned at December 31, 2005				2006 ACTIVITY
						Adjusted									Adjusted					Gain			Adjusted
				Total		Book									Cost					(Loss)			Book
		Acquisition		Cost in		Value		Original		Supplemental					at		Disposal	Sale		From			Value
City	State	date		Property	Impairments	12/31/2005		Cost		Costs		Impairments			Disposal		date	Proceeds		Sale			12/31/2006
Birmingham	AL		11/6/2006						226,948															226,948
Grass Valley	CA		11/7/2006						477,070		3,387		(56,852	)										423,605
Woodstock	IL		11/14/2006						122,624				(8,874	)										113,750
Pleasant Hill	IA		11/14/2006						181,360				(15,467	)										165,893
Cincinnati	OH		11/21/2006						134,051				(1,760	)										132,291
Glenolden	PA		11/20/2006						125,023		556		(11,828	)										113,750
Claremore	OK		11/29/2006						261,482				(29,432	)										232,050
Calera	AL		11/29/2006						121,634				(7,338	)										114,296
Mableton	GA		12/5/2006						142,328															142,328
Shepherdsville	KY		12/12/2006						242,645				(28,795	)										213,850
Macon	GA		12/15/2006						67,181				(7,121	)										60,060
West Hills	CA		12/18/2006						707,716		460		(116,676	)										591,500
Florissant	MO		12/22/2006						115,940															115,940
Newark	NJ		12/21/2006						164,515		2,603													167,118
Duluth	GA		12/23/2006						207,684				(24,547	)										183,138
						$	5,721,084	$	20,271,117	$	300,336		($2,094,424	)	$	14,028,272		$	13,879,205		($149,067	)	$	10,169,841

Rollforward of Real Estate Owned
Balance at December 31, 2005	$	5,721,084
Cost of Property Acquired		20,271,117
Supplemental Costs		300,336
Impairments (recorded as paid claims)		(2,094,424	)
Cost of Property Sold		(14,028,272	)
Balance at December 31, 2006	$	10,169,841

Page 4 of 4