The private mortgage insurance industry (PMI) logged a banner year in 2020, aiding more than 2 million low downpayment borrowers get mortgage financing, up 53% from the year prior.
That’s according to U.S. Mortgage Insurers (USMI), a trade organization that represents PMI companies nationwide. The group also reported that, per public filings, PMI supported approximately $600 billion in mortgage originations, with 65% going toward home purchases and 35% to refinancing.
All told, almost $1.3 trillion in outstanding mortgages had active PMI coverage at the end of 2020, highlighting, according to USMI, “the industry’s critical role as serving as the first layer of protection against credit risk in the conventional mortgage market backed by the [government-sponsored enterprises].”
“Despite the unprecedented challenges presented by the COVID-19 pandemic, conventional loans backed by private MI continued to make the dream of homeownership a reality for millions of low downpayment borrowers,” said Lindsey Johnson, president of USMI. “The record-high volume in 2020 means that more families were able to become homeowners and existing homeowners were able to reduce their monthly mortgage payments by taking advantage of historically low refinance rates.”
Claudia Merkle, CEO of National MI, discussed the factors that led to the jump in PMI last year in a blog post on USMI’s website.
“First, there are more and more first-time homebuyers coming into the market,” she said. “They have good credit, but struggle to put 20% down on their first house. Private MI is a great fit for them. … Nearly 60% of purchase loans with MI are first-time homebuyers, and more than 40% of borrowers with MI mortgages have annual incomes below $75,000.
“A second factor attributed to this large MI market is low interest rates. Rates helped fuel the strong mortgage market momentum in 2020 for both the purchase segment and also for refinances. We have seen private MI penetration of refinancing more than double … The combination of these various factors contributed to a really strong production in 2020.”
Johnson added that the PMI industry was able to support the record number of borrowers due to increased capitalization on the part of PMI companies. USMI members held over $6.3 billion in excess of capital requirements set by Fannie Mae and Freddie Mac at the end of 2020.
“All USMI members were well-capitalized prior to the pandemic and continued to raise capital in the debt and equity markets throughout 2020 in order to scale up for increased volume,” Johnson said.