National MI has a competitive advantage over the other private mortgage insurers because
Fannie Mae and Freddie Mac allow mortgage insurers to offer lenders rescission relief after 36 months. But if the insurer underwrites the loan itself, it can offer rescission relief before 36 months, said Brad Shuster during a conference call where
Because NMI will do all the underwriting for loans that come in through either the delegated or nondelegated channel it can offer lenders rescission relief and resonates with the large national accounts which have suffered under the rescission policies of the legacy mortgage insurers, says Shuster.
Loans that typically come in through the delegated channel are underwritten by the lender and the insurer accepts judgment that from a risk management standpoint.
When asked about the competitive landscape in the MI business having changed since Shuster and his partners first raised private capital to start the company, there has been capital raised by the legacy insurers but unlike them, NMI has a clean balance sheet.
He has met with a number of companies and explained NMI’s value proposition and they have seemed receptive.
On the financial end, Jay Sherwood, chief financial officer, says the company is more focused on building its level of insurance-in-force so it gets to a breakeven point.
For that to happen, NMI estimates it needs to have $12 billion to $14 billion of insurance-in-force. How long it will take to get there depends on such factors the size of the mortgage origination market and the split in penetration on low downpayment loans between FHA and private MI.
As for developing new business, the first quarter of next year will be important as NMI completes integration with several national accounts. Those accounts will be sourcing loans from correspondent originators, Shuster says.
NMI spent much of the time since it opened in 2012 hiring its management team and sales force as well as building the necessary information technology and operational infrastructure. “While this building phase was not as exciting as generating revenue from issuing mortgage insurance policies, it was a necessary part of our development and we believe we are now ready to face off with the market,” he adds.
