In the first quarter of 2023, private mortgage insurers experienced a weaker performance compared to the same period in 2022. New insurance written decreased by 9%, although this was relatively flat compared to the volumes seen in the last three months of 2023. This decline in new insurance written activity was even more pronounced when compared to the fourth quarter of 2023, with a 15% decrease.
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.
Despite a decrease in new insurance written activity, total mortgage production also saw a slight decrease quarter-to-quarter due to estimates from the Mortgage Bankers Association showing $377 billion for the period ended March 31 compared to $399 billion three months earlier. However, it was still higher than the first quarter of 2023 which saw a volume of $333 billion.
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 and competes with government programs like Federal Housing Administration (FHA). It plays an essential role in ensuring that lenders can offer mortgages to borrowers who might not otherwise qualify due to their credit or financial situation.
Looking at the first quarter results for six active mortgage insurance underwriters, it is clear that industry is facing challenges in this current market environment due to rising interest rates and tighter lending standards imposed by regulators.
The COVID-19 pandemic has had an impact on many sectors, including private mortgage insurers. With fewer people purchasing homes during this time due to economic uncertainty and concerns about job security, demand for private mortgage insurance has decreased significantly.
Furthermore, government programs like FHA have been taking on more market share as they have become more accessible and affordable options for borrowers with lower credit scores or down payment requirements.
Overall, it is evident that private mortgage insurers must adapt quickly if they are going to remain relevant in this changing market environment by finding new ways to meet borrower needs and generate revenue while maintaining regulatory compliance