Low interest rates means plenty of new business for mortgage insurance, and the environment created the tailwinds for Radian Group Inc. to break a record in new insurance written, according to CEO Richard Thornberry.
The company reported $18.5 billion of new insurance written for the second quarter, which bested its previous second-quarter high mark by 13%, Thornberry said during a conference call to discuss earnings.
The interest rate environment encourages both new mortgages and refinancing, but new loans from home purchases are more likely to have mortgage insurance. That segment of business accounted for 90% of new insurance written for the quarter, the CEO said.
Refinancing does create a drag on persistency, or the retention rate of loans on the books of mortgage insurers. But Thornberry said the record volume of new business more than offset a decline in persistency during the second quarter.
Radian's CEO also painted a sunny picture of the housing market in general. Although supply is tight, price increases have mitigated and are now paced better with income growth, resulting in better home affordability, Thornberry said.
"These trends are expected to lead to continued growth of purchase originations, particularly for first-time homebuyers, who represent one-third of home sales," he said.
If trends hold, Radian will in 2019 exceed its annual record for new mortgage insurance written set in 2018, which saw $56.5 billion in new policies, Thornberry said. Business fundamentals have been strong, the regulatory "guardrails" under Dodd-Frank is clear and consistent and credit quality for loan applications is excellent, he added.