Delinquent loan inventories, bloated by coronavirus forbearances, shrunk more than expected for private mortgage insurers in May, as the U.S. economic recovery continues.
For the first time, Enact Holdings, formerly Genworth Mortgage Holdings, reported monthly delinquent inventory data, joining the other standalone mortgage insurers; however, Essent Group has not updated its reports since the end of the first quarter. Enact's initial public offering was postponed in May due to market conditions.
"May default inventory is already below our 2Q21 estimate for both MGIC and Radian, with both new defaults and cures tracking better, which should support further loss ratio improvement in the second quarter," Ryan Gilbert, an analyst with BTIG, said in a research note.
MGIC ended May with 45,101 loans in its delinquent mortgage inventory, which is already more than 200 loans below the 45,305 Gilbert expected by the end of the second quarter. This was down from 47,825 at the start of the month. There were 3,016 new notices of delinquency, which were more than offset by 5,638 cures. MGIC also paid out 101 claims and there was one denial of coverage.
At Radian, the 42,802 delinquency loans in its inventory as of May 31 came in 1,432 mortgages below Gilbert's expectations by quarter's end. The company received 2,714 new notices of default but 5,573 cures, along with 32 claims paid and four denials, reduced the inventory.
At National MI, the delinquent inventory ended the month at 9,387 mortgages, down from 10,060; Gilbert was modeling 9,599 loans at the end of the second quarter.
But Gilbert was impressed by the amount of new business that National MI, the smallest of the private mortgage insurers, was driving.
"Policies in force increased 23% from the first quarter, also ahead of our estimate and against the trend of slowing mortgage volume growth," Gilbert said in a separate note on National MI. "As the smallest PMI with an approximate 9%-10% market share, National MI has an embedded growth advantage until it reaches the scale of larger peers."
Gilbert did note that National MI "modestly" opened up its risk underwriting in recent months, which is supporting that growth. However, the company "continues to write among the highest credit quality new insurance written in the industry."
At Enact, the delinquent inventory ended May at 35,159, down from 37,490 at the start of the month and 53,587 on June 30, 2020.
Enact's May delinquency rate of 3.8% was well below 6% at the end of the second quarter last year. National MI, whose book of business does not include any financial crisis legacy loans, had a 2.02% delinquency rate for May.
