Author Topic: NMIH - NMI Holdings  (Read 529 times)

aglittell

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NMIH - NMI Holdings
« on: March 23, 2020, 12:16:38 PM »
NMIH is a private mortgage insurance provider w/ $90bln of policies in force, earning a 22% ROE last year. The stock has been slaughtered and is currently trading at .8x TBV, down from 2.5x TBV at the end of FY19.

Does anyone have any thoughts on how to price the risk of defaults in the privately insured mortgages? Fannie and Freddie have announced 1 year forbearance arrangements with their lenders to prevent mass defaults. However, the private mortgage insurers work with a diversified pool of lenders and to my knowledge, these lenders could still foreclose in the event of default, triggering massive liabilities for the private mortgage insurers.

This could be a very attractive entry point if the mass default of homeowners is prevented by gov intervention. If the airlines and other big businesses are getting bailed out while citizens are being delivered helicopter money, I expect homeowners to get relief on mortgages as well.

Appreciate any thoughts.
« Last Edit: March 23, 2020, 12:17:35 PM by Parsad »


abitofvalue

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Re: NMIH - NMI Holdings
« Reply #1 on: March 24, 2020, 09:51:46 PM »
NMIH is a private mortgage insurance provider w/ $90bln of policies in force, earning a 22% ROE last year. The stock has been slaughtered and is currently trading at .8x TBV, down from 2.5x TBV at the end of FY19.

Does anyone have any thoughts on how to price the risk of defaults in the privately insured mortgages? Fannie and Freddie have announced 1 year forbearance arrangements with their lenders to prevent mass defaults. However, the private mortgage insurers work with a diversified pool of lenders and to my knowledge, these lenders could still foreclose in the event of default, triggering massive liabilities for the private mortgage insurers.

This could be a very attractive entry point if the mass default of homeowners is prevented by gov intervention. If the airlines and other big businesses are getting bailed out while citizens are being delivered helicopter money, I expect homeowners to get relief on mortgages as well.

Appreciate any thoughts.

NMIH probably insures only Fannie / Freddie loans. highly highly doubt they are doing much in the non-agency private space given its a tiny portion of the market anyway.

lemsinge

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Re: NMIH - NMI Holdings
« Reply #2 on: April 03, 2020, 02:50:10 PM »
This industry is getting hit very hard right now, yet I believe the cynicism is overdone. NMIH & ESNT are two companies that have no legacy exposure, some of the best reinsurance & ILN coverage in the industry, and primarily high FICOs (avg. is 750) and lower LTVs (mostly in the 80% - 95% range). While there will be delinquencies I believe they will be primarily driven by other areas of the housing market and these guys will ultimately see lower portfolio losses than what we witnessed in 08/09. Could be wrong on this with all of the uncertainty out there...

They don't touch Fannie & Freddie loans. Technically, they compete with them (all though they charge more). They give mortgage insurance to higher quality borrows than those at Fannie or Freddie. Definitely uncertainty in that department since their is no agreed upon plan. Some mortgage insurers have recession relief programs, or have adopted the stance of Fannie/Freddie, but nothing uniformed as of yet.

What concerns me is PMIERs (Industries equivalent of regulatory capital). Everybody in the industry is likely to fall below regulatory capital, which gives investors the risk of a capital raise at depressed prices. Historically, regulators have waived PMIER requirements for mortgages that are affected by hurricanes or other natural disasters. Will regulators waive these requirements/reduce them for the time being? The industry is calling for it but it is unclear if that will be the case.