Study: Private Mortgage Insurance Impacts on Homeownership

A new report from the U.S. Mortgage Insurers (USMI), a trade association that represents private mortgage insurance companies, has found that over the last 15 years, companies have furthered their ability to better support the housing finance system and serve as a source of strength in the system through the ups and downs of market cycles. 

The report, “Private MI: A Source of Strength & Resiliency in the Housing Finance System,” highlights the capital and operational standards implemented by the industry since the 2008 financial crisis, along with innovations to increase the distribution of credit risk. These developments have contributed to the emergence of a strong private MI industry that meets the needs of borrowers, actively manages mortgage credit risk, and serves as a source of reliability and resiliency in the housing finance system. 

“Private MI plays a critical role in facilitating homeownership for first-time and low- and moderate-income borrowers while shielding lenders, the government-sponsored enterprises (GSEs), and taxpayers from credit risk. The implementation of important enhancements over the past 15 years has made the private MI industry stronger and more resilient,” said Seth Appleton, President of USMI. “Not only does private MI provide stability to the housing market, but it is also very well positioned to meet borrower demand as proven by the more than 1 million Americans who relied on private MI in 2022 to purchase or refinance a home.” 

Among the enhancements to the industry in the last 15 years, USMI’s new report outlines and analyzes the following: 

• Private Mortgage Insurer Eligibility Requirements (PMIERs) – Since the 2015 revision to PMIERs, developed in partnership with the Federal Housing Finance Agency (FHFA) and the GSEs, private mortgage insurers now hold 69% more capital than the required regulatory threshold. USMI member companies have maintained levels significantly over the PMIERs capital requirements, and collectively hold $11 billion in excess of these requirements, representing a 169% sufficiency ratio. 
• New Master Policy—Implemented by USMI members on March 1, 2020, the policy increased clarity of terms and streamlined the payment of claims to ensure, in the event of borrower defaults, that private MI results in reliable and predictable payments to lenders. 
• Rescission Relief Principles—Introduced in 2013 and revised in 2017, the Recission Relief Principles include automatic relief after 36 timely payments, with early relief available after 12 timely payments with a full file review. It also provides private MI companies with the ability to offer increased rescission relief. 
• MI Credit Risk Transfer (MI-CRT) Structures – Private MI companies have transferred nearly $73.8 billion in risk on more than $3.4 trillion of insurance-in-force (IIF). Further, after introducing MI insurance-linked-note (ILN) programs beginning in 2015, private MIs have issued 56 ILN transactions, transferring nearly $22.3 billion of risk on more than $2.3 trillion of notional mortgages. 

Click here to view the research in its entirety.