Roughly 525,000 first-time homebuyers were able to obtain low-down-payment mortgages last year thanks to private mortgage insurance, or PMI.
That’s 65% of the total 800,000 buyers who used PMI to qualify for financing with less than 20% down in 2024. But in California, according to U.S. Mortgage Insurers (USMI), 72% of those who used PMI were first-timers, and in Illinois, 71% were rookies, the trade group reported.
What’s more, publicly reported data shows that the cost of private insurance, as measured by in-force premium yields, has declined 25% since 2017.
That’s “in stark contrast” to other costs of home ownership, says USMI, reaffirming that the “small, temporary cost “ of monthly PMI provides outsized benefits to everyone along the mortgage production line.
A new USMI report details how private mortgage insurance is strong private capital that provides stability to the housing market and broader financial system.
“For nearly seven decades, private MI has provided a dual benefit to the housing market: it creates ownership opportunities for qualified borrowers – particularly first-timers – who lack substantial down payments, while simultaneously serving as a robust safeguard against mortgage default, thereby reducing overall risk in both the housing and financial markets,” says USMI President Scott Appleton.
The report finds nearly 35% of those who used PMI last year had annual incomes below $75,000, while the average loan amount was $352,632. Also, USMI calculated that it could take the typical buyer 27 years to save for a 20% down payment, or nearly three times as long as it does to save for the roughly 5% down payment that generally comes with private mortgage insurance.
The total value of mortgage originations supported by PMI in 2024 was nearly $300 billion, the report says. And at the end of the year, PMI firms insured nearly $1.6 trillion of mortgages, including $1.4 trillion of loans backed by Fannie Mae and Freddie Mac.
Since 1957, according to the report, nearly 40 million borrowers have benefitted from PMI. And since the 2008 financial crisis, PMI firms have covered nearly $60 billion in claims for losses.
Appleton describes PMI as “a small, temporary cost that helps borrowers overcome the down-payment barrier and achieve the American Dream sooner.” PMI is “temporary” because it can be canceled once the loan meets certain requirements.
USMI also notes that going forward, the monthly fee for private mortgage insurance will once again be tax deducible. Between 2007 and 2021, when the write-off was allowed to expire, the deduction was claimed more than 44 million times.
For the third consecutive year, Texas, Florida, California, Illinois, and Ohio ranked as the top five states for mortgage financing with PMI. More than 67,000 loans were written with PMI in Texas, followed by Florida with 49,200, California with 43,300, Illinois with 38,500, and Ohio with 36,500.
In each of those states, rookie buyers accounted for the lion’s share of the PMI mortgage.
PMI also serves as the first layer of private capital protecting the housing finance system from unnecessary risk. “It has proven to be a reliable method for protecting Fannie Mae, Freddie Mac, lenders, investors, and taxpayers from losses, having paid $60 billion in claims since the 2008 financial crisis and housing market downturn,” the report maintains.
