Statement by Mortgage Insurance Companies of America (MICA)
June 26, 2011
Washington, D.C., June 26, 2011—The Mortgage Insurance Companies of America (MICA) statement responds to reported inaccuracies regarding the health and financial stability of the private mortgage insurance industry.
Throughout the course of the current residential mortgage market crisis, the U.S. private mortgage insurance industry has done what its regulatory-mandated structure was specifically designed to accomplish: to pay all valid claims; and with regard to the GSEs, to protect the American taxpayer. To date, and during the current housing market stress, private MIs have paid over $22 billion in claims to Fannie Mae and Freddie Mac, thereby reducing U.S. taxpayer liability by over 14 percent.
The private MI industry is well-capitalized and as such, is committed to and will continue to pay all valid claims as it works in tandem with the government to stabilize the GSEs and the overall residential housing market.
Recent media reporting has inaccurately misstated the financial health and status of industry companies by making assertions that do not reflect the realities of the private mortgage insurance industry’s role in today’s housing market. Since the housing market entered into the current crisis, the private MI industry has raised over $8 billion in new private capital, which is a testament of investor confidence in the industry’s ongoing role in the marketplace. More importantly, over the past two plus years, the private MI industry has insured over $170 billion in new mortgage loans through sound, prudent underwriting standards, reflecting the highly secure profitability of the private MI business model.
Changes implemented by the private MI industry in the aftermath of 2007 have resulted in the underwriting of profitable books of business despite the continuing difficult economic and housing market environment. This profitable new business now comprises a growing portion of the private mortgage insurers’ portfolio. As such, these earnings are absorbing an increasing percentage of the declining losses on older business. As the FHA returns to a lower, traditional share of the housing market, the level of private MI new business should increase further, thereby bolstering the industry’s continued ability to meet the needs of the low down payment residential housing market.
MICA member companies are required to retain in a contingency reserve 50 percent of premiums collected to pay claims as they arise. The remaining premiums derived from the new business are available to pay other expenses associated with the general obligations of each company, including claims resulting from prior books of insured business. Industry regulators have provided an enhanced level of flexibility in support of private mortgage insurers during the current housing market.
Private mortgage insurers have the willingness and the available capacity to continue to play an integral role in the new housing finance structure.