We are an established and growing private mortgage insurance company. We were
formed to serve the U.S. housing finance industry at a time when the demands
of the financial crisis and a rapidly changing business environment created
the need for a new, privately funded mortgage insurance company. We believe
that our success in acquiring customers and growing our insurance in force has
been driven by the unique opportunity we offer lenders to partner with a well-capitalized
mortgage insurer, unencumbered by business originated prior to the financial
crisis, that provides fair and transparent claims payment practices, and consistency
and speed of service.
Private mortgage insurance plays a critical role in the U.S. housing finance
system. Essent and other private mortgage insurers provide credit protection
to lenders and mortgage investors by covering a portion of the unpaid principal
balance of a mortgage and certain related expenses in the event of a default.
In doing so, we provide private capital to mitigate mortgage credit risk, allowing
lenders to make additional mortgage financing available to prospective homeowners.
Private mortgage insurance helps extend affordable home ownership by facilitating
the sale of low down payment loans into the secondary market. Two U.S. Federal
government-sponsored enterprises, Fannie Mae and Freddie Mac, which we refer
to collectively as the GSEs, purchase residential mortgages from banks and other
lenders and guaranty mortgage-backed securities that are offered to investors
in the secondary mortgage market. The GSEs are restricted by their charters
from purchasing or guaranteeing low down payment loans, defined as loans with
less than a 20% down payment, that are not covered by certain credit protections.
Private mortgage insurance satisfies the GSEs' credit protection requirements
for low down payment loans, supporting a robust secondary mortgage market in
the United States.
Our primary U.S. mortgage insurance subsidiary, Essent Guaranty, Inc., received
its certificate of authority from the Pennsylvania Insurance Department in July
2009. We subsequently acquired our mortgage insurance platform from a former
private mortgage insurance industry participant and in 2010, became the first
private mortgage insurer to be approved by the GSEs since 1995. We are licensed
to write mortgage guaranty coverage in all 50 states and the District of Columbia.
U.S. Mortgage Market
The U.S. residential mortgage market is one of the largest in the world, with
over $9.95 trillion of debt outstanding as of September 30, 2015, and includes
a range of private and government-sponsored participants. Private industry participants
include mortgage banks, mortgage brokers, commercial, regional and investment
banks, savings institutions, credit unions, REITs, mortgage insurers and other
financial institutions. Public participants include government agencies such
as the Federal Housing Administration, or FHA, the Veterans Administration,
or VA, the U.S. Department of Agriculture Rural Development program and the
Government National Mortgage Association, or Ginnie Mae, as well as government-sponsored
enterprises such as Fannie Mae and Freddie Mac. The overall U.S. residential
mortgage market encompasses both primary and secondary markets. The primary
market consists of lenders originating home loans to borrowers, and includes
loans made to support home purchases, which are referred to as purchase originations,
and loans made to refinance existing mortgages, which are referred to as refinancing
originations. The secondary market includes institutions buying and selling
mortgages in the form of whole loans or securitized assets, such as mortgage-backed
securities.
GSEs
The GSEs are the largest participants in the secondary mortgage market, buying
residential mortgages from banks and other primary lenders as part of their
government mandate to provide liquidity and stability in the U.S. housing finance
system. According to the Federal Reserve, the GSEs held or guaranteed approximately
$4.5 trillion, or 45.3%, of total U.S. residential mortgage debt as of September
30, 2015. Their charters generally prohibit the GSEs from purchasing a low down
payment loan unless that loan is insured by a GSE-approved mortgage insurer,
the mortgage seller retains at least a 10% participation in the loan or the
seller agrees to repurchase or replace the loan in the event of a default. Historically,
private mortgage insurance has been the preferred method utilized to meet this
GSE charter requirement. As a result, the private mortgage insurance industry
in the United States is driven in large part by the business practices and mortgage
insurance requirements of the GSEs.
Mortgage Insurance
Mortgage insurance plays a critical role in the U.S. residential mortgage market
by facilitating secondary market sales and by providing lenders and investors
a means to diversify their exposures and mitigate mortgage credit risk. Mortgage
insurance is provided by both private companies, such as Essent, and government
agencies, such as the FHA and the VA. From 1996 through 2015, an average of
22.3% of total annual mortgage origination volume utilized mortgage insurance.
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