Private Mortgage Insurance Industry is Ripe for Growth, According to National MI
First-time home buyers represent a critical segment of the home purchase market, and a considerable opportunity for private MIs, Shuster noted. "Approximately 33% of all GSE-securitized purchase mortgages in the first half of 2013 were first time home buyers," he said. Statistics show that the average age of a first-time home buyer is 34 years old, Shuster said, and an increasing number of Americans will turn 34 nearly every year over the next decade. In fact, over 40 million Americans will reach that age in the next 10 years. Based on median home prices across the country, research shows that it takes the average first time home buyer 14 years to save a 20 percent down payment for a home. By providing the credit enhancement needed for lower down payment mortgages, private MI can reduce the time it takes a borrower to save a down payment to under six years, Shuster said.
While overall originations have decreased recently, the percentage of purchase mortgage volume relative to refinance volume is increasing, which Shuster believes bodes well for private mortgage insurers. "MI penetration is traditionally four times higher in purchase mortgages than in refinances. We expect that the recovery in the housing market and the resulting increase in purchase originations mean that private MIs should see a boost in business," Shuster said. Total originations are projected to be between
In addition, the shift towards private MI is expected to continue as the FHA pulls back to historic levels following several price increases, he said.
However, Shuster believes the industry requires additional private capital to meet the growing demand for private mortgage insurance. National MI estimates that the industry requires between
The company raised approximately
While the opportunities for private MIs as a whole are positive, Shuster believes that National MI is especially well-positioned to grow in the coming years. He cites the following factors:
- Industry leading underwriting protection and coverage terms
- National MI is the first mortgage insurer to offer 12 month rescission relief, and is currently the only insurer to grant 12 month rescission relief on all loans. The historical industry standard is 36 months
- A differentiated business model that enables National MI to be the first and currently the only mortgage insurer to underwrite every policy
- A clean balance sheet with no legacy liabilities or rescission history
- A highly favorable underwriting and credit quality environment
- A simple organizational structure
- A fully staffed sales force located in key regional territories throughout the country
"We believe National MI's innovative approach represents a distinct and better way to insure mortgages. We offer a strong capital base, counterparty strength, a differentiated product, and we provide superior ease of use," Shuster said at the conference.
A link to Shuster's presentation is available on National MI's website on the "Events and Presentations" page of the "Investors" section at ir.nationalmi.com.
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