Overdue stocks of mortgage insurers are falling faster than expected

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Stockpiles of overdue loans, inflated by coronavirus abandonment, fell more than expected for private mortgage insurers in May as The US economic recovery continues.

For the first time Enact Holdings, formerly known as Genworth Mortgage Holdings, released monthly arrears inventory data, joining other independent mortgage insurers; however, Essent Group has not updated its reports since end of the first quarter. Enact initial public offering was postponed in May due to market conditions.

“May default stocks are already below our Q221 estimates for MGIC and Radian, with improved tracking of both new defaults and treatments, which should support further improvement in the second quarter loss ratio,” said Ryan Gilbert, analyst at BTIG Note …

MGIC ended May with 45,101 loans in its inventory of overdue mortgages, which is more than 200 loans below the 45,305 loans Gilbert expected by the end of the second quarter. This was less than 47,825 at the beginning of the month. There were 3,016 new notices of wrongdoing, which were more than offset by 5,638 corrections. MGIC also paid 101 claims and there was one denial of coverage.

As of May 31, at Radian 42,802 late loans accounted for 1,432 loans below Gilbert’s expectations by the end of the quarter. The company received 2,714 new default notices, but 5,573 fixes, along with 32 paid claims and four denials, reduced inventory.

National MI’s NPL inventory ended at 9,387 mortgages, up from 10,060; Gilbert modeled 9,599 loans at the end of the second quarter.

But Gilbert was impressed by the size of the new business run by National MI, the smallest private mortgage insurance company.

“The current policy increased by 23% compared to the first quarter, which also exceeded our estimates and amid a slowdown in mortgage loan growth,” Gilbert said in a separate note on National MI. “As the smallest PMI with a market share of roughly 9-10%, National MI has a built-in growth advantage until it reaches the scale of its larger peers.”

Gilbert noted that National MI has “modestly” opened up risk underwriting in recent months to support this growth. Nonetheless, the company “continues to rank among the top credit quality new insurances in the industry.”

At Enact, the arrears inventory ended at 35,159, up from 37,490 at the beginning of the month and 53,587 as of June 30, 2020.

Enact’s delinquency rate in May, which stood at 3.8%, was well below 6% at the end of the second quarter of last year. National MI, whose ledger does not include any legacy loans after the financial crisis, had a 2.02% arrears in May.



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