Reducing volatility and increasing private capital
MI-CRT has been used by the MI industry since 2015. The increased use of CRT by private mortgage insurers to access the global reinsurance and capital markets has significantly reduced the industry’s exposure to mortgage credit “tail risk.” This, combined with enhanced Private Mortgage Insurer Eligibility Requirements (PMIERs), has transformed the MI industry from a cyclical business to a more stable, long-term manager of mortgage credit risk.
MI-CRT enables private mortgage insurers to reduce volatility in the business and bring more sources of private capital to the housing market, without diluting the important role that private mortgage insurers play as a second set of eyes that actively manage and hold capital against mortgage credit risk.
Current state of the industry
From 2015 through 2022, the private MI industry issued 51 insurance linked notes through the capital markets, transferring more than $20.8 billion of risk exposure on nearly $2.2 trillion of notional mortgages and completed 42 quota-share and excess of loss reinsurance transactions, ceding $47 billion of additional risk to the traditional reinsurance market. In total, nearly $68 billion of risk was transferred since 2015, providing the private MI industry additional capacity to support new borrowers. At the end of 2022, the industry insured more than $1.5 trillion of mortgages, including more than $1.3 trillion of mortgages backed by the GSEs.
Evolution of MI-CRT
From a cyclical industry to stronger counterparty
MI-CRT allows the private MI industry to serve as a strong and stable counterparty to the GSEs, Fannie Mae and Freddie Mac, and therefore taxpayers. It also brings tremendous value to other institutions where private MI assumes the first loss—while also facilitating access to affordable mortgage finance credit for millions of people who do not have significant down payments.
USMI’s report, “Private Mortgage Insurance: Stronger and More Resilient,” highlights the many regulatory and industry-led reforms implemented over the last decade to improve and strengthen the role of private MI in the nation’s housing finance system.
The report analyzes the various regulatory enhancements and the industry-led initiatives that private MIs have taken and continue to take to ensure sustainable mortgage credit through all market cycles and to better serve low down payment borrowers in the conventional market, especially during critical economic times.