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Radian announces decrease to mortgage insurance premiums

Borrowers to save an average 6%

Radian Group, a subsidiary of Radian Guaranty, announced a decrease in its overall mortgage insurance premium rates.

Radian announced its new rates will provide increased risk-based granularity to the company’s pricing across most of its products. The new pricing will become effective as of June 4, 2018.

The company explained its strategy is to optimize its risk-adjusted returns to its MI portfolio, and decrease its monthly premium rates. However, the company also increased its single premium rates for mortgage insurance.

Radian explained to HousingWire that single premium mortgage insurance, or mortgage insurance that is paid in one lump sum rather than monthly payments, makes up just 15% to 20% of originations, but generates a much lower return than monthly premium rates. For this reason, the company increased its single premium rates, but was able to reduce its pricing on some of the more sustainable, higher return products.

The combined actions will result in an overall premium rate decrease of about 6%, including the impact of the new rate adjustors on about 50% of new business.

“We believe these pricing changes, which are more risk-based in nature and better align with industry trends, will offer transparency and consistency for our customers and help them to provide affordable options for their borrowers,” Radian CEO Rick Thornberry said.

But Radian isn’t the first mortgage insurance company in recent weeks to announce it is cutting its borrower-paid rates. At the beginning of April, MGIC Investment Corpannounced it reduced its mortgage insurance premium rates by an average 11%. Then, at the end of the month, Genworth Mortgage Insurance also announced its own decrease by an average 10%.

Last year, the Federal Housing Administration announced a cut to its mortgage insurance premiums, which President Donald Trump’s administration halted following his inauguration in 2017. 

Then in November, despite some thought that the FHA may reinstate the cut, the U.S. Department of Housing and Urban Development announced that premiums will not be cut, due in part to the weaker-than-expected performance of the FHA’s flagship insurance fund, the Mutual Mortgage Insurance Fund.

And now, a new analysis from the Urban Institute suggests private mortgage insurance is growing more competitive against the FHA.

“We are well positioned to compete for the MI business that meets our portfolio management targets and expect to generate strong through-the-cycle economic value and returns for our stockholders,” Thornberry said.

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