2022 was another banner year for the mortgage market, as reported by the U.S. Mortgage Insurers [1] (USMI), because the industry supported nearly $402 billion in mortgage originations, 97% of which was for home purchases.
Of those mortgages, approximately one million borrowers benefited from the numerous low (or no) down payment programs offered by Fannie Mae and Freddie Mac (the GSEs). Approximately 97% of these mortgages were new purchases and first-time homebuyers represented nearly 62% of purchasers with private mortgage insurers.
All-in-all, this brought the market up to $1.5 trillion in outstanding mortgages with current private mortgage insurance by the end of 2022, underscoring the industry’s critical role in serving as the first layer of protection against credit risk in the GSE-backed conventional mortgage market.
“At a time when affordability is a paramount issue, conventional loans backed by private MI continued to make the dream of homeownership a reality for 1 million first-time, low- to moderate-income and minority borrowers,” said Seth Appleton [2], President of USMI. “The fact that the majority of borrowers with private MI were first-time buyers underscores the great benefits they receive from the availability of low down payment mortgages backed by private capital.”
Low- to moderate-income borrowers also benefited from these programs; nearly 35% of those that purchased or refinanced a mortgage with private insurance had incomes below $75,000 with an average loan amount of $341,716 according to the GSEs combined data. According to USMI, the insurance industry has enabled approximately 38 million people to access affordable, low down payment mortgages in its 66-year history.
“The MI industry has continued to be a source of financial strength in the markets, providing uninterrupted access to mortgage credit without any special interventions or actions during the sudden heightened stress we have been witnessing in other sectors of financial services,” said USMI Chairman Adulfo Marzol. “The same was true during the extraordinary financial stress that hit during the onset of COVID. MI remained available and affordable at all times.”
Marzol continued, “these transactions have proven to be a durable and cost-effective source of support for the private MI industry. And the ability to use MI-linked note transactions to procure reinsurance through the capital markets has been invaluable, increasing the capacity of our industry to serve borrowers in need of low down payment financing.”
At the end of 2022, the private MI industry held nearly $11 billion of eligible assets in excess of the GSEs’ Private Mortgage Insurer Eligibility Requirements (PMIERs) capital requirements, which represented a 172% sufficiency ratio. This furthered the private MI industry’s ability to support lenders and borrowers over the past year.