The Urban Institute [1] released a new report recently, chronicling the last 60 years of private mortgage insurance (PMI) in the United States [2], which provided the history of the industry, as well as insight into what can be done to stay relevant in an ever-changing market.
In addition to examining the origin and evolution of PMI, the current mortgage insurance market, the intended customer base, and the importance of PMI to the government-sponsored enterprises, the 52-page report also considered the way the industry can ensure its future success in the years to come.
As per the report, the future of the PMI could be affected by the increased popularity of government mortgage insurance. In 2009, the market share of FHA and VA provided mortgage insurance stood at 85 percent—today it’s down to 65 percent, which is still above the norm.
Still, PMI isn’t performing as it should. Combined, mortgages insured by the FHA and the VA have tripled from 2001 to 2015, $167 billion to $477 billion respectively. Conversely, PMI is down, from $282 billion in 2001, compared to $270 billion in 2015.
PMI remains heavily reliant on the government sponsored enterprises, which the report says can pose a problem in the future. A few ways to curb that is to branch out into insuring loans in lender portfolios, if possible. Another way is to branch out into working with nonbanks to encourage them to increase their lending portfolio.
As the report says, “Demographic changes and other mortgage market developments provide the industry both opportunities and challenges to expand its role to support historically underserved populations and first-time homebuyers using private capital.”
Forward thinking is the only way to get ahead, and the PMI industry, according to the report, could "additionally look toward more portfolio lending, which could represent growth opportunities."
You can read the full 52-page report here [2].