Mortgage insurance activity, including insurance written by government programs like the FHA and VA as well as and private insurers, rose significantly to $189 billion, up from last quarter’s $140.2 billion and up 11 percent over 2015. Though FHA’s market share fell to 34 percent in 2016 Q2 (from 41 percent the previous quarter), the private insurance market’s share increased to 38 percent (from 33 percent the previous quarter) as it regained ground lost to FHA when it reduced its premiums, according to second quarter data from the Urban Institute’s Housing Finance Policy Center.
Mortgage Insurance Activity
The jump in PMI premiums also reflects the popularity of new low down payment mortgages for first-time buyers introduced over the past two years by Fannie Mae and private lenders like Wells Fargo and Bank of America. These include Fannie’s HomeReady™ mortgage, which offers below market mortgage rates, reduced mortgage insurance costs, and the most innovative underwriting idea on more than a decade. Fannie’s Conventional Loan 97 offers a 3 percent down payment, which was originally discontinued in December 2013 and was later reinstated by the Federal Home Finance Agency in late-2014. For many home buyers, it’s a less-expensive option as compared to an FHA loan.
Median down payments have fallen to 5 percent, or $13,000, for agency loans, according to AEI’s Mortgage Risk Index Release for June 2016. The median is even smaller for first-time buyer loans, especially for Ginnie loans (3.5%, $5,300), according to AEI’s June National Mortgage Monitor. For agency market as a whole, the median down payment is small, only 5% of the total home price, which works to be $12,000 based on current median prices.