We estimate that our industry’s market share for the third quarter was 15.5% with approximately 25% being single premium, which is predominantly lender paid or LPMI. Within the industry we believe that we have maintained the market share gains we realized over the last several quarters and estimate that our fourth quarter market-share was 20%.
For the full year our new insurance written increased 12% over last year, coming in at $33 billion. In the fourth quarter we wrote $9.5 billion of new business, up 43% when compared to the fourth quarter of 2013.
LPMI singles comprised approximately 14% to the quarter’s volume and reflecting the competitive environment there was an average discount of just under 5% from the LPMI rate card. There was no material impact to the overall premium yield on NIW as a result of the LPMI discount however.
While difficult to say precisely, our expectation is that the level of LPMI and level of discount will increase from fourth quarter levels. As you’re aware the FHA is going to reduce its annual premium rate by 50 basis points at the end of January and while we certainly expect the FHA to reduce its premiums in time, after it shored up its balance sheet frankly we were taken aback by the amount of the premium reduction and the premature timing relative to its financial situation. Obviously this premium reduction is contrary to the FHA’s need to increase its reserve fund. It was approximately two months ago that the latest FHA actuarial report reported that the reserve fund was still below its minimum capital level and that an extra year had been added to the amount of time it would take to get to the 2% minimum.
In addition the premium reduction is also contrary to the public policy desire for the housing finance system for increased use of private capital. But as I’ve said many times over the past five years it is what it is and let’s get on with it. It’s been a bit more than a month since the GSEs announced that they would again purchase 97% LTV loans provided their mortgage insurance is obtained to lower GSE and tax payer risk. This was welcome news as we are already willing to insure these loans on established guidelines and pricing.
However as we sit here today we are not anticipating writing a material amount of this business because the FHA premium reduction will make the FHA more attractive to many of their lower FICO borrowers, after the GSE’s loan level price adjustments guarantee fees and PMIERs are considered. It is disappointing that private capital did not get a chance to demonstrate that it can help improve access to credit for all credit worthy borrowers regardless of FICO score. However even after considering the FHA premium reduction we estimate that for a substantial majority of the business we wrote in 2014 that borrowers would still have had a lower monthly payment using private MI than FHA insurance and if any of the GSEs fees are lowered it makes our premium plans more appealing for all FICO scores.
Plus the borrower’s concern was the total cost of mortgage insurance or a faster build-up of equity, private mortgage insurance is a much better execution to the borrower regardless of the monthly cost differential at virtually all FICO levels which is shown on our portfolio supplement.
