Benefits of Mortgage Insurance
Mortgage insurance benefits residential lending activities in a number of significant ways:
Risk Transfer
As a third-party insurer, PMI removes a significant portion of the insured loan’s default risk from the lender’s book.
Regulatory Capital Relief
Mortgage lending carries capital charges, and high loan-to-value lending may incur surcharges due to the increased risk. Mortgage insurance reduces lending risk and therefore may aid the lender in obtaining capital relief.
High Loan-to-Value Market Expansion
Mortgage insurance assumes and diversifies the risk of high loan-to-value lending, permitting lenders to increase their loan-to-value limits without adding more risk to their portfolio. Availability of high loan-to-value loans expands homeownership and opens up new market segments for lenders.
Underwriting Review
High loan-to-value lending requires specialised underwriting expertise. PMI offers 30 years of experience to help accurately evaluate these risks.
Secondary Market Development
Synthetic securitisations free up capital by transferring the mortgage risk to a third party.
Mortgage-Backed Securities
Mortgage insurance may be used as a credit enhancement on mortgage-backed securities, improving the rating of securities issued. The result may be lower capital charges, lower issuance costs for securities, and a higher return on capital for the lender.
