Wells Fargo’s approval of National MI as a counterparty for loans it buys in the correspondent channel has paid off in a big way for the private mortgage insurer.
National MI estimates it will have done $950 million in new insurance written for the third quarter which ends today. That is more than double the $430 million it did in the second quarter, according to data from MortgageStats.com.
And that growth trajectory is expected to continue, said Bradley Shuster, president and chief executive, at the JMP Securities Financial Services Real Estate Conference on Tuesday. It is expecting to see more volume as new clients such as Chase (which has also approved National MI as a counterparty for its correspondent channel) ramp up their operations with the fledgling company.
While Shuster would not comment on what percentage of market share it expects to get from the approximately 650 lenders it has signed master policies with, National MI expects to get more than its pro rata share of business from several of them.
This is because of its master policy terms, especially the one that limits the rescission period to 12 months after the policy is written, which “got us in the door” with most lenders.
Right now 185 lenders (including nine national originators) have loans insured by National MI. The benchmark, according to chief financial officer Jay Sherwood, is for 75% of the companies that have signed a master policy agreement to insurance loans at National MI.
Furthermore, given the work needed by a lender to set up a new mortgage insurer in terms of technology and compliance, companies are not going through that “to make us a small-share player,” Shuster said.
National MI is able to offer the 12-month rescission policy because it underwrites every loan it issues a policy on. Right now, some of its competitors only offer this as an option, he said. But it will be the way private mortgage insurers will do business in the future, he predicted.
National MI had the smallest market share among the seven active companies for the second quarter, according to MortgageStats, just 1%. Shuster said some of the legacy companies (most likely United Guaranty and Radian although he did not name them) took the opportunity in the bust period to grow their market share to an outsized percentage. As market share shifts back to historic norms, National MI expects to pick up business because of its value proposition, Shuster said.