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U.S. Mortgage Insurers (USMI) has released its annual report on mortgage financing supported by private MI (mortgage insurance) at the national and state levels.
The report found that the industry has helped more than 38 million low down payment borrowers over its 66-year history to secure mortgage financing, including more than one million in 2022, according to data from the government-sponsored enterprises (GSEs), Fannie Mae, and Freddie Mac.
The report finds that saving for a 20% down payment could take potential homebuyers 35 years—nearly three times longer than it takes to save for a 5% down payment. Texas, Florida, California, Illinois, and Ohio ranked as the top five states for mortgage financing with private MI in 2022.
“Access to affordable and sustainable mortgage financing is vital, as potential homebuyers contend with higher interest rates, elevated home prices, and constrained inventory in many markets,” said Seth Appleton, President of USMI. “Private MI has enabled first-time and low- to moderate-income borrowers to secure affordable mortgage financing since 1957, while protecting taxpayers from mortgage credit risk. Thanks to private MI, more than one million borrowers were able to purchase a home or refinance a loan in 2022.”
The latest USMI report examines the number of borrowers served, the percentage of borrowers who were first-time buyers, average loan amounts, and average FICO credit scores. USMI also calculates the number of years to save for a 5% versus a 20% down payment for each state plus the District of Columbia.
Key findings from the report include:
- It could take 35 years on average for a household earning the national median income of $70,784 to save 20% (plus closing costs), for a $392,800 single-family home, the national median sales price. That wait time decreases by 66% with a 5% down payment mortgage.
- In 2022, the number of homebuyers who qualified for a mortgage because of private MI was more than one million.
- Nearly 62% of purchase mortgages went to first-time buyers, and nearly 35% had annual incomes below $75,000. The average loan amount purchased or refinanced with private MI was $341,716.
- The private MI industry supported approximately $402 billion in mortgage originations in 2022. Approximately 97% of mortgages were purchase loans, resulting in nearly $1.5 trillion in outstanding mortgages with active private MI coverage at year-end.
According to research from Fannie Mae, private MI ranks among the lowest costs associated with homeownership, with total private MI payments representing 0.5% of lifetime homeownership costs for the average purchase borrower, plus borrow-paid MI can be canceled after a period of time. Private MI also provides protection against mortgage credit risk and is structured to stand in front of default-related losses that would otherwise be borne by the GSEs or taxpayers in the conventional mortgage market.
As of the end of 2022, the private MI industry insured more than $1.5 trillion of mortgages, including $1.3 trillion in mortgages backed by the GSEs. Private MI has proven to be a reliable method for shielding the GSEs from losses, having paid nearly $60 billion in claims since the 2008 financial crisis and housing market downturn.
