Mortgage insurers continue taking market share from FHA

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Private mortgage insurance continued to take market share from the Federal Housing Administration in 2017, with both products outpacing the growth in mortgage debt outstanding.

Total insurance-in-force for the MIs — which included the three companies no longer actively underwriting — grew 10.6% last year over 2016, according to a Keefe, Bruyette & Woods report.

FHA grew by 4.7% year-over-year.

Combined, insurance-in-force grew by 7.3% over 2016. Through the third quarter, mortgage debt outstanding increased at a 3% annualized rate over the previous year.

The higher rate of growth in loans using any MI products versus the overall market should continue for the foreseeable future, KBW said.

FHA ended the year with $1.17 trillion of insurance-in-force, while the private companies had $1 trillion (the precrisis peak for private MI's IIF was $1.02 trillion at the end of 2008). This equates to a 53.8%/46.2% market share split. Just four years ago, FHA made up 60% of total IIF, while private MI had 40%.

The decision by the Trump administration to put a 25-basis-point cut in the FHA mortgage insurance premium on hold benefited the private MIs' share last year to some extent. However loans submitted to the private MIs typically have higher credit scores.

"We believe that private MI will continue to grow at a strong pace as the credit box continues to widen modestly and the PMIs continue to grow faster than the FHA," said the KBW report from analysts Bose George, Thomas McJoynt-Griffith and Eric Hagen.

"Further, increased persistency (assuming interest rates remain stable or trend up) should help support IIF growth rates."

Meanwhile, within the ranks of the six active private MIs, the expected market share shift away from Arch to the other players took place.

During 2016 Arch and United Guaranty, the company it acquired on the last day of that year, had a 26% pro forma share of new insurance written. For 2017, it had a 23% share; for the fourth quarter, Arch's share was 20.6%, with the dollar volume of NIW for the period only slightly above that posted by Radian. In the third quarter, Arch had a 22.8% share, while Radian had a 19.5% share.

National MI was another big gainer in share, going to 9.8% from 7.9% in the third quarter.

MGIC had the second largest market share in 2017 at 18.2%, followed by Essent at 16.3% and Genworth at 14.4%.

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PMI Underwriting Real estate FHA Arch Mortgage Insurance Co. United Guaranty Corp