Mortgage insurers know who butters their bread, and it's not homebuyers
As president and CEO of Arch MI, the new No. 1 private mortgage insurance carrier, David Gansberg has his company focused on new opportunities for growth, like the rise of millennial and low-to-moderate-income borrowers and the ever-important purchase mortgage market.
PMI carriers work with mortgage lenders as their customers, rather than the borrowers who actually pay for insurance policies. And that disconnect may contribute to the consumer sentiment that PMI is an extra cost and a barrier to getting a mortgage, not the enabler that puts borrowers into homes.
Loan officers are responsible for explaining to borrowers the benefits and drawbacks of PMI and alternatives, such as government-guaranteed offerings and even piggyback loans. When asked if is there a way to directly connect with consumers, Gansberg said, "I don't think we're there yet as an industry, but there's some great potential there for down the road."
"Where is our educational campaign best directed? Is it at the loan officers, is it the Realtors or is it the consumers?" Gansberg said, adding he didn't know if the name recognition of a PMI company means a lot for consumers.
In the meantime, PMI providers are focused on their interactions with lenders and loan officers. The next step in the chain to the borrower is the real estate agent. "Over time we've got to find ways to be better with the Realtors," Gansberg said.
When they were separate companies, Arch and United Guaranty both embraced a similar "black box" pricing philosophy that relies on granular, loan-level decisions, as opposed to the rate card and pricing matrix strategy employed by other PMI carriers.
That's helped make for a smoother transition of combining the two businesses, but is not the only way Arch seeks to differentiate itself.
"At the end of the day, the black-box pricing strategy, that's not a long-term value creator in our business, that is my belief. Our business plan is not built around that," Gansberg said. "Where we try to differentiate ourselves is on innovation. That innovation comes in the form of, not necessarily the black box, but the way that rates and the way that mortgage insurance is delivered to customers."
That involves delivering the mortgage insurance rate quote to loan officers into the field so they can access it on a mobile device and pass the information on to the consumer.
Loan officers "get quotes in a fast manner, with an easy sign on and they get the stability of knowing once they get a price it's not going to change, without a change to significant risk characteristics. So it is about trying to deliver a better product to them," said Gansberg.
Arch has gone so far as to create a separate underwriting subsidiary for portfolio loans, Arch Mortgage Guaranty. Since it's not a GSE-eligible mortgage insurer, Arch Mortgage Guaranty does not follow the GSEs' capital standards or underwriting rules. "So we can work with lenders on creating custom programs, on really serving their needs and finding out exactly what they want," Gansberg said.
There is one sales team for both Arch subsidiaries and UG. Each lender has one account manager as a point of contact. Arch's challenge is "getting them to understand what Arch is about and part of that educational process is introducing them to some of the alternative products that we have," Gansberg said.
Arch isn't the only PMI carrier considering mobile delivery. PreApp 1003 lets loan officers do prequalifications on mobile devices; its customers can get price quotes from Mortgage Guaranty Insurance Corp. without leaving the system.
"We definitely want the borrower to know that MI is an option…that they need to consider in their buying decision."
— Leslie Malicki, business partner relationship manager, MGIC
"We definitely want the borrower to know that MI is an option…that they need to consider in their buying decision. Giving them the MI [cost] upfront to evaluate that is going to help them see the big picture," said Leslie Malicki, MGIC's business partner relationship manager.
So even though the borrower is not MGIC's customer, it sees the need to educate them about the product.
"We feel that it is important that a consumer understands what their options are. We just feel that education is the most important component of that and once given all of the options, the consumer is able is to make the choice that is right for them," said Margaret Crowley, vice president of marketing and customer experience. And that includes getting the quote out earlier in the process, she continued.
"In 60 years of doing business, we know that customer experience is the most important thing and is our most important differentiator," Crowley said.
This is because lenders see PMI as a commodity.
"The product that everyone sells is the same; I don't think there is any way to really differentiate what you are doing. The companies try to be good from a service standpoint, to make the process seamless or for the lender make their lives easier," said Bose George, an analyst with Keefe, Bruyette & Woods. So it is on the service side where the PMIs can compete.