MGIC and Radian announced Wednesday that they have abandoned plans to merge amid worsening market conditions, dropping all outstanding litigation in the process.
In February, MGIC had announced a deal worth $4.9 billion to acquire Radian, and by May shareholders had approved the deal.
However, things began to unravel in late July when subprime credit woes rocked joint venture C-BASS, one of the leading residential mortgage servicers.
MGIC deemed the merger worthless as a result, while Radian demanded that the deal move forward.
Later in August, MGIC filed a lawsuit against Radian seeking additional information it deemed necessary to complete the merger, which Radian failed to disclose because of its sensitive nature.
Many analysts fear that Radian could be a sinking ship, and that the failure to merge could send the S&P rating on the company to dangerous levels, damaging sales and causing the company to seek additional capital.
The merger was originally believed to close in early October, and would have created a mortgage giant, insuring roughly $290 billion worth of first mortgages.
MGIC and Radian were both trading roughly higher in early trading Wednesday after opening slightly lower.