Radian Group Inc. executives expect to maintain the company's level of new insurance premium written despite an expected drop-off in mortgage originations this year.
If interest rates go up as anticipated, the origination market is expected to shift away from refinancings and toward actual purchases, CEO Sanford Ibrahim said during an earnings conference call.
Originations from purchases are forecast to grow to the largest number in about a decade. Compared to mortgages originated from refinancing, those originated from homebuying tend to favor private insurers by a multiple over government-backed insurance, he said.
"This is a positive for our industry," Ibrahim said.
Radian's quarterly report showed an estimated 34% year-over-year growth in new insurance written from purchases, far surpassing the 5% growth forecast, one analyst noted on the call. Radian attributed the outperformance to better education of loan officers and a heightened appreciation in the market for private mortgage insurance.
Since the recession, loan officers made a habit of referring new mortgages to the Federal Housing Administration for insurance, and are only now changing that behavior, Ibrahim said.
"It took a long time to get them to switch, and we're benefiting from that," he said.
The decision by President Donald Trump's administration to suspend the FHA's planned rate cut should improve the balance in housing finance between government-sponsored enterprises and private capital, Ibrahim said.
For 2017, the company expects insurance in force to improve, possibly aided by a decrease in policy turnover that should help boost Radian's persistency rate, said CFO J. Franklin Hall.