While all four standalone private mortgage insurers reported month-to-month reductions in their delinquent loan inventory, the pace of improvement at the two legacy companies is lagging.
That is likely reflective of the pattern of government-sponsored enterprise mortgages in forbearance, which continued to drop, but also at a slower rate, according to Black Knight. Between the weeks of Jan. 5 and Feb. 2 the number declined by 19,000 units, bringing the total to 913,000 loans. But between Dec. 8 and Jan. 5, GSE mortgages in forbearance fell by 33,000.
Still, the shrinking inventory is a good sign for the mortgage insurers. "While the pace of improvement was slower than December, January metrics still support our view that Radian's loss ratio will compress throughout 2021 which should push return on equity, and the multiple, higher," Ryan Gilbert, an analyst with BTIG, said in a report on Radian.
But Gilbert noted that Radian's January cure rate was 10%, down from 11% in December and 12% in November.
Radian's inventory ended January at 54,488 delinquent mortgages, compared with 55,537
At MGIC, the inventory of delinquent mortgages declined by 1,395 to 56,315 on Jan. 31; in December the inventory was reduced by 1,526 mortgages.
In January, the company had a higher share of new notices of default from servicers regarding loans in forbearance versus December — 47% of 4,810 in January; 46% of 4,941 in December. However, a slightly smaller percentage of the overall inventory was in forbearance at the end of January 60%, compared with 62% one month prior.
Still, MGIC's January's rate of new loans entering default is effectively in line with pre-COVID-19 levels, Gilbert said in his report on that company.
At National MI, the delinquent inventory was down by 304 loans in January to 11,905. That’s only slightly smaller than December's drop of 323 loans.
Its delinquency rate continues to improve, ending January at 2.9%, compared with 3.06% in December and 3.6% at the end of the third quarter 2020.
That is ahead of the pace Gilbert forecast for the current quarter at National MI. He predicted a 3.2% delinquency rate in a joint report on that company and Essent.
Essent’s January default rate of 1.0% is in line with Gilbert's estimates, but the cures are running behind. "There appears to be some seasonality in Essent's cure rates from the fourth quarter to the first quarter, and we expect a pickup in February and March," he said. That seasonality is evident at the other mortgage insurance companies.
Unlike its competition, Essent actually had an increase in the number of loans exiting its inventory in January over December. Its delinquent inventory fell to 30,895 mortgages at the end of January, down 574 units from December's 31,469. Between November and December, Essent's inventory declined by 481 loans.
