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How Mortgage Insurance Can Help Fast-Track the American Dream

In 2021, the private mortgage insurance (PMI) industry reported that it assisted helped nearly two million low down payment borrowers secure mortgage financing, according to U.S. Mortgage Insurers (USMI), an association representing the nation’s leading PMI companies.

According to the report, the MI industry helped more than 37 million low down payment borrowers over its 65-year history to secure mortgage financing, including nearly two million alone in 2021, according to data from the government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac.

Texas, California, Florida, Illinois, and Ohio ranked as the top five states for mortgage financing with private MI.

The below table shows the top five states where private MI was used by borrowers to purchase or refinance homes in 2021:

Fannie Mae reports that private MI ranks among the lowest costs associated with homeownership, with total private MI payments representing 0.5% of lifetime homeownership costs for the average purchase borrower.

“Skyrocketing home prices, driven by record low housing supply have made homeownership unreachable for many Americans. It is critical that affordable, sustainable low down payment mortgages are available to meet borrowers’ needs,” said Lindsey Johnson, President of USMI. “For 65 years, the private MI industry has been helping to level the homebuying playing field, providing first-time and low- to moderate-income borrowers with access to mortgage credit. Thanks to private MI nearly two million borrowers purchased a home or refinanced in 2021.”

Key findings from USMI’s report include:

  • It could take 14 years on average for a household earning the national median income of $67,521 to save 20% (plus closing costs), for a $353,400 single-family home, the national median sales price.
  • The wait time decreases to just five years with a 5% down payment insured mortgage—a 64% shorter wait time at the national level.
  • Nearly 60% of purchase mortgages went to first-time buyers, and more than 40% had annual incomes below $75,000. The average loan amount purchased or refinanced with private MI was $310,275.
  • The private MI industry supported approximately $585 billion in mortgage originations in 2021, with approximately 80% for new purchases, while 20% was for refinanced loans, resulting in approximately $1.4 trillion in outstanding mortgages with active private MI coverage at year-end.

The number of years to save for a down payment decreased in comparison to USMI’s past reports, as the personal saving rate reached record highs during the first six months of 2021, as reported by the Federal Reserve. This was largely due to consumer spending decreasing, government stimulus checks, and an increase in unemployment insurance.

According to a 2020 Congressional Research Service report, the “saving rate usually goes up when there’s a decline in general economic activity, but it can quickly fall back down when there are positive signs of growth.”

The U.S. economy experienced this growth as businesses reopened during the second half of 2021, once the pandemic started to recede. As a result, personal saving rates resumed regular levels as consumers began spending more and saving less, while the economy also experienced high inflation, limiting people’s ability to save.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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