Private mortgage insurers experienced a weaker first quarter compared to the same period last year, with new insurance written falling by 9%. However, this was relatively flat compared to the volumes seen in the last three months of 2023. Despite this decrease, total mortgage production also saw a decrease quarter-to-quarter, with estimates from the Mortgage Bankers Association showing $377 billion for the period ended March 31 compared to $399 billion three months earlier.
The drop in new insurance written activity was even more pronounced when compared to the fourth quarter of 2023, with a 15% decrease. This decline was attributed to a variety of factors including economic uncertainty and changes in lending standards.
During this period, MGIC saw a decrease in market share, benefiting Radian and National MI instead. Radian saw a 1.5 percentage point increase to 19.5% market share, while National MI saw an 0.8 percentage point increase. Industry-wide, new insurance written for the first quarter totaled $59.1 billion, slightly higher than the previous quarter’s volume of $59 billion, but lower than the $64.6 billion seen in the first quarter of the previous year.
Private mortgage insurance is often used as credit enhancement for loans with loan-to-value ratios over 80% sold to Fannie Mae and Freddie Mac. It competes with government programs like the Federal Housing Administration (FHA). The decline in new insurance written activity can be attributed to decreasing demand for private mortgage insurance as well as increased competition from other forms of credit enhancement such as FHA loans and securitization of mortgages without private mortgage insurance coverage (mortgage-backed securities). Additionally, changes in lending standards and regulations have also impacted demand for private mortgage insurance products.
Looking at the first quarter results for the six active mortgage insurance underwriters, it is clear that the industry is facing challenges in the current market environment. However, despite these challenges there are opportunities for companies that can adapt to changing market conditions and find innovative ways to meet customer needs while remaining compliant with regulations and maintaining profitability.