The percentage of low down payment loans using private mortgage insurance continues to grow, and should continue as more first-time homebuyers get conforming loans, according to Keefe Bruyette & Woods.
Private mortgage insurers had a 47% share of insurance-in-force at
During that time, private MIs added $355 billion of insurance-in-force, while the FHA added $86 billion and nearly all of that was in just the past two years. In the past year, MI companies added $104 billion and the FHA added $38 billion of IIF. The total IIF estimate for the private mortgage insurers included the existing book of business for the three companies in runoff: PMI, Republic Mortgage Insurance Co. and Triad Guaranty, which was calculated using government-sponsored enterprise disclosures.
There was 6.8% year-over-year growth in loans that used some form of mortgage insurance as credit enhancement. In comparison, there was a 3% year-over-year increase in mortgage debt outstanding through the first quarter of this year (the latest data available), KBW said.
"We believe that private MI growth will continue to remain strong in the near-to-medium term driven by a fairly stable purchase market and the high share of first-time homebuyers using GSE loans. Further, persistency should remain elevated driven by rising interest rates, and the recent decrease in premiums by the MIs (effective in June) should result in some market share shift from the FHA," the KBW report from Bose George, Thomas McJoynt-Griffith and Eric Hagen said. Persistency measures the percentage of policies that remain on the books from 12 months prior.
Nearly 18% of FHA borrowers last year had a credit score over 720, and with the private MIs lowering their pricing, those borrowers could see lower premiums with that product.
Among the six active MI companies, Arch had the largest IIF share at 24.8%, followed by Radian, MGIC, Genworth, Essent and National MI. From year-end Essent increased its share by 50 basis points while National MI was up by 60 bps, the only two companies to see an increase in IIF share.
Meanwhile the two mortgage insurance alternatives introduced by