Private mortgage insurers transfer risk on $2.8 billion of coverage

the US mortgage insurers (USMI), which is the trade association representing the nation’s leading private mortgage insurers, announced that the industry has transferred more than $55 billion in risk on nearly $2.8 trillion in insurance in effect from 2015 to 2021.

This use of MI Credit Risk Transfer (MI-CRT) has reduced the volatility of the business and brought more sources of private capital to the housing finance market.

According to the USMI, the MI-CRT, combined with the enhanced capital standards required by Government Sponsored Enterprises (GSEs) and the Federal Housing Finance Agency (FHFA), has transformed the industry from a cyclical business into a manager more stable and long term. mortgage credit risk.

“While some housing market players have suspended or scaled back their CRT activities over the past two difficult years, the private sector of IM has continued to execute CRT transactions,” the USMI Chairman said. Lindsey Johnson. “This underscores the confidence of investors and reinsurers in the private health insurance industry in the critical role we play in helping millions of people access affordable mortgage credit while taking a disciplined approach to new business underwriting.”

Johnson recently discussed MI-CRT with the President and CEO of National MI Adam Pollitzer:

“The MI-CRT is central to how the private MI industry manages credit risk. The tools we use – insurance-linked note offerings, excess of loss reinsurance treaties and quota-share reinsurance agreements – each serve to absorb risk and loss in stress scenarios,” Pollitzer said. . “CRT strengthens the strength of our counterparties, strengthens and diversifies our funding profile beyond entity-based equity, and enables us to underwrite more business and support more borrowers with greater efficiency. Every dollar of risk transferred through CRT unlocks another dollar of mortgage volume that we can support for new borrowers.

Between 2015 and 2021, the MI private sector issued 49 insurance-linked notes transferring $20 billion of risk on over $2 trillion in notional mortgages to capital market investors. This represents $55 billion of risk transferred off the balance sheets of private mortgage insurers, meaning additional capacity to support new waves of borrowers.

In 2021 alone, the industry insured $1.4 trillion in mortgages, including $1.2 trillion in GSE-backed mortgages.

“IM’s private sector is better positioned today than ever to support borrowers in need and provide private capital solutions that insulate lenders, GSEs and ultimately taxpayers from risk and losses in an economic downturn,” Pollitzer said. “Over the past 10 years, the terms of our coverage, the regulatory framework governing our shares, our funding needs and capital position, our underwriting standards and how we assess risk, pricing policies and management of our extreme exposure have all fundamentally altered.And the performance of IM’s private industry through the arc of the pandemic is a high point.

The MI industry has provided more than 37 million families with access to affordable, low-down payment mortgages in its 65-year history. In 2021, the industry provided nearly 2 million borrowers with access to mortgage credit and supported $585 billion in mortgage originations. Nearly 60% of these insured loans went to first-time home buyers, more than 40% to borrowers with incomes below $75,000, and the average mortgage size with MI Private was approximately $310,000.

The USMI says it works closely with federal policymakers, industry groups, and consumer organizations to support and advocate for low-down payment buyers and homeowners throughout the year. The organization has sent letters and released statements in support of bipartisan and bicameral legislative initiatives to make permanent the ability of homeowners to deduct MI premiums from federal income; submitted a Federal Housing Finance Agency (FHFA) Request for Input (RFI) comment letter on its Fair Housing Finance Plans; and joined the Black Homeownership Collaborative in calling on the Biden administration to focus on the critical need for housing production to fill the large deficit that continues to drive up home prices across the country.

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