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11/5/2020
We have summarized all of our ILN transactions in the quarterly supplement that is on our website. In closing, I would like to mention that each of our sources of capital has its own strengths and weaknesses that must be considered. We believe that a balanced approach using our own balance sheet, using forward commitment quarter share treaties, and accessing the capital markets is important to maintaining a strong balance sheet and maximum flexibility for both the writing company and the holding company. And with that, let me turn it back to Tim.
Thanks, Nathan. Before moving to questions, let me address a few additional topics. As I mentioned in prior quarters, the FHFA has re-proposed a rule setting forth a capital framework for the GSEs. The agency is currently reviewing public comments that are received on a re-proposed rule. The FHFA director has stated that he would like it to be finalized yet this year. Since we don't know how or if any of the comments will shape the final rule, it is hard to say at this point what impact the final rule will have on the MI industry. That said, we do believe that the FHFA appreciates the benefits that an insurance company structure can provide to the housing finance system relative to capital markets and other less regulated solutions. The FHFA is also continuing the review of all GSE activities, and it recently proposed revisions to a rule for the GSEs that has been in effect since 2009. The proposal would require the GFCs to provide advance notice to FHFA of new activities to obtain prior approval before launching new products. The proposed rule establishes revised criteria for determining whether a new activity requires notice to FHFA and for determining if that activity is a new product that merits public notice and comment. This seems to be further evidence that the FHFA wants the role of the GFCs to be more clearly defined than it is today. Earlier this year, the CFPB proposed changes to the definition of qualified mortgage and the so-called GFC patch. The revised definition would replace the borrower's debt-to-income ratio in the definition with a pricing threshold. The comment period for the CFPB proposal ended September 8th, and the proposed changes have a targeted publication date of April 2021, and they would be effective six months later. The CFPB recently said they would extend the GFC patch which was set to expire in January of 2021 until the effective date of the new QM rule, perhaps Q4 2021 or Q1 2022, or when the GSEs exit conservatorship, whichever occurs first. While other market options for credit enhancement can be scarce or unavailable at various points in the economic cycle, our company and our industry continues to provide credit enhancement solutions to lenders, borrowers, and the GSEs in all economic environments. While we are focused on prudent responses to the current environment, we continue to be actively engaged in discussions regarding housing finance policies for the future. We continue to advocate for the increased use of private capital, including private mortgage insurance. Long term, we remain encouraged about the future role that our company and industry can play in housing finance, but it continues to be difficult to gauge what actions may be taken by the FHFA, CFPB, and the legislature in the timing of any such actions. Private mortgage insurance offers many solutions and a great value proposition for lenders and consumers to overcome the number one barrier to home ownership, the down payment. We are navigating this period of uncertainty with a book of business that has strong underlying credit characteristics, and we are supported by a balance sheet that has a low debt to capital ratio, an investment portfolio of nearly $7 billion, contractual premium flow, and a robust reinsurance program. As I mentioned at the beginning of my remarks, In addition to the well-being of our employees, we are focused on, one, continuing to provide critical support to the current housing market, and two, positioning our company to prosper over the long term. In closing, I want to remind listeners that since our founding in 1957, we have successfully navigated many economic cycles and have continually provided borrowers and lenders with affordable and prudent low-down payment options. I am confident that we have the right team in place to continue to deliver the quality products and service our customers have come to expect. from MGIC. With that, operator, let's take questions.
Again, if you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And your first question comes from the line of Sam Chod, from Credit Suisse. Your line is now open.
Hi, good morning, guys. I'm Alfred Doug today. Since we ended on some of the regulatory updates, this might be a little premature given that we're still getting some clarity on the political landscape. But do you anticipate if there's a change in the administration that some of the regulatory trends that you've been seeing might be altered? How are you thinking about that?
Yeah, this is Tim, and obviously we're all watching sort of the results of the election, and I know more will be coming out today. It's really hard to say. I mean, a lot of it comes down to the individuals that are in places, and I would tell you that, you know, we focus on it and we talk about it, but don't spend too much time worrying about it, and, you know, we'll wait and see what the election results finally are, how the cabinets get built out, whether it's a a Trump victory and him building out the cabinet that he has and making any changes, or if it's a Biden victory. Then obviously, when you look down and look at the Senate and the House, it seems like it's going to be more down the middle. And so I think in general, we feel really good about our ability to sort of navigate through that environment.
Got it. Okay, that's helpful. So I'm looking at your October numbers and it seemed like, um, insurance and forth growth, uh, enforced growth was, um, I mean, it, it seemed to be trending on a year over year basis, similar to what we've been seeing in the third quarter. Is that a reasonable assumption for the remainder of the year? And how does that set up for maybe the early part of 2021?
And this is Tim again, I think, um, you know, there's, there's been some pretty heavy refi activity out there still. And so, you know, there's, persistency has been challenged. Uh, but obviously some pretty strong volume out there to be done. And, and as I mentioned in my comments, the purchase volume has stayed strong. Um, it, you know, even recently, which would seasonally be down. Um, so it's tough to say that that trajectory is going to stay the same. Um, you know, just as the enforce book grows, it becomes tougher to keep that same trajectory. But we feel really good about what's happening in the housing market right now, our ability to play capital at good returns. And we think that's going to continue for a good period of time here.
Got it. So are you guys able to kind of guess what that year-end NIW production for the entire year might be? Or is that just hard to say at this point?
Hey, Sam, it's Mike Zimmerman here. So, one, we're not going to get out of the forecast because there's such volatility with the numbers. I mean, obviously, we've already got one month in the bank, if you will, and you can see that within the insurance and force, the applications, you know, it's usually 45, 60 days. So, we do have some visibility there, at least probably through, certainly through November, but December still has to play out, so... We'll beg off answering those specific to that.
Got it. All right. Thank you so much, guys.
Sure. Thank you.
And your next question comes from the line of Bose Charge of ADW. Your line is now open.
Hey, guys. Good morning. I wanted to ask just about home prices have obviously been very strong. And I'm just curious, just from a mechanic standpoint, You know, how does that flow through to your loss provision? You know, how does it impact your defaulted claim expectations? And, you know, what are you kind of assuming on the existing inventory in terms of home prices?
Yeah, this is Nathan. I'll take that one. I mean, certainly the home price appreciation that we've seen, you know, not just the last couple of months, but really over the last year has been, continued to be really strong. It seems like in a lot of parts of the country, it's accelerated. I think what we've observed over time, though, is that we still get claims in markets where there is home price appreciation, that there's a distribution of that. And then I think that home price appreciation is also certainly more uncertain as you look out going forward with the macroeconomic uncertainty that exists. So it's a factor. It's certainly a consideration. But I think it's a positive influence, but there's obviously a lot of moving parts right now, both favorable and unfavorable. in terms of the macro things that we're looking at when it comes to setting the new notice claim rate and loss development assumptions that we have.
Okay. That makes sense. But presumably if it remains very strong, it would increase the ability to cure, so eventually it should reduce the defaulted claim rate if that persists. Is that kind of a way to think about it?
Yeah, I think that's the right way to think about it.
Okay. Great. Thanks. And then just on your singles, the production was 7%. It was down quite a bit over the last quarter and quite a bit more from last year's levels. Is that something in the industry or is that a product position that you guys have been making?
Hey, both. It's Mike. Yeah, I'd say it's really reflective of what the marketplace is out there. Given what the refinance transactions usually look singles are less prevalent there, so you have that phenomenon. Obviously with interest rates very low, you know, and risk-based pricing, you know, the LTB and the VIX, you know, all comes into play. So I think it's really more just of an industry thing versus any deliberate strategy, you know, certainly on our part.
Okay. And actually just one more on that. I remember, you know, in the past this was kind of a lower return product just because of the increased competition in that market. Is that still the case, or are returns there pretty similar to kind of the market?
Again, this is Mike. I think if you go back several years, that would probably be a pretty accurate statement. For the last several years, with all the risk-adjusted pricing and the pricing engines, et cetera, that came into play, I don't think that is as accurate of a statement as it would have been several years ago.
Okay, great. Thanks.
And your next question comes from the line of Randy Piner from B. Riley. Your line is now open.
Thank you. I just want to try one more kind of around macro commentary on the housing market. And it clearly is a lot of tailwind from interest rates and supply and demand and this COVID tailwind for people who want more space. But I think, you know, there's a thought out there that, as stimulus support wears off, there could be increased challenge. Do you have a view on that specifically? Because that would seem to be kind of the unknown or potential headwind as opposed to all these tailwinds.
Randy, I'll let Tim answer the question, but it was a little bit steady with the connection. So just to make sure we heard the question right, it was really more of a, macro view on housing, whether a second or third or whatever additional wave through and any potential economic impact that that could have on the business if it came through right?
Correct.
Okay.
Yeah, I think that's a good question, Randy. I think obviously there was speculation that if there was more of a blue wave that there might be stronger stimulus ultimately. You know, we have some expectation that there will be some additional stimulus. Obviously, part of it has to do, I think, with what the path of the virus is, which is difficult to know. But I still think our view is that we would expect there's going to be some amount of stimulus, although I think there'll probably be a lot more discussion about it, again, where the election seems to be trending. But I guess I'd say ultimately we think there will be some. And in general, again, I view housing as being extremely resilient through all this. So while the size can matter, I think it probably matters a little bit less from a housing standpoint.
All right, and hopefully you can hear this question. This is a detailed question on the model, just confirming that the debentures were paid down to zero with the refi.
This is Nathan. We repurchased approximately 48 million principal amount of the debentures. So those were retired. And then we also did the intercompany where we moved the $133 million of the debentures that MGIC previously held back to the holding company, and those were retired. But there are still a little over $200 million of the debentures still outstanding.
$200 million of the 9% or $200 million total?
of the 9%. 209 million of the 9% are still in the United States.
Okay. I might follow up on that. Thank you.
Sure. Thanks.
And your next question comes from the line of Jack Nisenko from SIG. Your line is now open.
Good morning. I'm hoping to unpack the claim rate a little bit more for the quarter. I think you went from seven last quarter to eight. And Nathan, I think you said it was because you had a lower mix of new DQs that are in forbearance, 67. What was that number last quarter? Just trying to get a sense of the magnitude that motivated the increase in claim rate.
Yeah. This is Nathan. I think the 67 is the amount in the delinquent inventory that is in forbearance. And that number actually hasn't changed very much from the second quarter to the third quarter. What I was referring to previously was the amount of new notices that we received that were in forbearance. I know we put the statistics out monthly. In the second quarter, I think it was something like 80% of the new notices that we received were in forbearance plans. and that number was modestly lower in the third quarter, although I don't have the exact number, but we have put out the monthly statistics on new notices and amounts and forbearance plans, so it's out there. I just don't have it in front of me.
Okay, and there was no development change, so you're not recasting an 8% back to last quarter, correct?
That's correct. No, I think we still feel really comfortable with where we were positioned yesterday, at the end of June for those delinquent items.
Okay. And then, you know, when we got the Trump tax cuts back in 2017, the MI industry and most industries passed some of that pricing on, or put the benefit, rather, onto some pricing. Would you expect both MGIC and the industry to raise prices in the event that we don't have a gridlocked Congress and something happens on the corporate tax side?
This is Tim. I guess I'm, one, hopeful that we don't have a tax increase, but two, if there is, it's hard to speculate exactly what the market response would be. I think it was a rational response with the tax cut that we and others in the industry from a marketplace reacted, and it's just tough to speculate that with the tax increase um, would it be the same response or not? Um, but again, I'm hopeful that, uh, that we don't see a tax increase ultimately.
Okay. And if I could just ask one more on the, um, you know, 80% of book value here, you've got, um, a billion for access going higher, um, on the three Q or four Q because you, you completed the island after the, after the quarterly, what do you, what are you all looking for? Um, to restart the buyback given the depressed value of the shares and your significant liquidity, and you've done a fair amount on the balance sheet in the last two quarters as well. Is it just the end of the forbearance period and what that looks like? Is it moratoriums on foreclosures? Is it delinquency trends? What are the one or two things that okay, this is, we're in the clear now. Let's take advantage of the valuation and deploy some excess capital. Or is it just the business is growing so much that, you know, you want to be able to, you know, meet the demand of kind of where NIW's been?
Well, Jack, it's Nathan. You did go through a lot of my list there. But I would, you know, I'd probably point to maybe two main things. I think we want to, the business is growing. certainly faster than we had previously with the volume of business and how we're positioned in the market. So I think we want to be able to have confidence that we can fund all of the growth that we're able to achieve and still maintain an appropriate access to PMIRES and can fund that with internally generated capital, which we've been able to do even through this increased growth period in the last two quarters. So I want to see that, especially if the purchase volume starts to pick up as a percent of the overall. We might see even more increased growth. Obviously, the refi activity, I think our expectation is that it's going to remain strong. So there's a little bit of uncertainty about future growth rates. And then the other big thing that I think about is the post-forbearance path for the large set of delinquent loans that we received in May and June in particular. We thought that some of those might be resolved in October as they got to six-month They're 180 days in forbearance, but in large part it seems like they've rolled to month seven, which is obviously allowed under the CARES Act. So it may be out into the first quarter of next year before we really see meaningful resolution on some of those items. And while we continue to feel confident in our provisioning and our reserve positioning, there is a lot of uncertainty there. about what the post-forbearance path looks like. I think to date it's looked really positive, but that's what we expected. We expected that the early activity would generally be favorable and that things that continue to remain, that most of the ultimate claims are going to come out of that bucket anyway. So I don't know that we've gotten a lot of good evidence yet to have conviction that our initial views of post-forbearance path is what actually happens. So we'll just, I think, want to see more on that and want to have confidence that we can fund our growth.
All right. Thank you.
Jack, just to circle back on the percentage of new notices going in, as they said, the second quarter, you were looking at around 80%. The numbers, I'd say, on average for the third quarter, you're looking at close to 60. You know, kind of step down each month, 67, 59, 56. So call it 60%.
Thanks, Mike. Thanks.
Your next question comes from the line of Mark DeVries of Sparkless. Your line is now open.
Thanks. There are obviously a lot of moving parts around the average premium, but Nathan, just wanted to get your thoughts on where you can see that bottoming if you ignore kind of the noise around the impact of both the profit commission and just the accelerated amortization on earned premiums from singles?
Yeah, thanks for the question. It's a good question. It's a difficult question. You know, the net premium yield is impacted by those things that we've, I think, always found to be very hard to predict on the accelerated single earnings. And really, you're you implicitly have a loss prediction in there relative to the profit commission on the, on the quota share deals. So I think when we've, when we've talked about this in the past, we've really focused on the enforced portfolio yield. Um, and even that, as you think about, you know, where does that evolve to over the next 12 to 18 to 24 months? Um, it's a, it's a largely a function of the new business that you write over that period and what the purchase and refinance mix looks there. So you end up needing to make a lot of assumptions there. I think our general view has been that the trend is down. You can see that in the quarter-over-quarter trend that we have in the earnings-release supplement. The pace of change this quarter was slightly higher. I think that's owing to the volume of business that we wrote this quarter and also the high level of refinance activity. to the NIW that we wrote. There were also a lot of cancellations this quarter. So that's resetting a lot of premium rates at lower levels, but it's also resetting a lot of capital levels at lower levels associated with the lower risk of the business that we're writing today. So I don't have a specific number to guide you to or a pacing on that because I think largely it's driven by some of the other assumptions you might make relative to the type and quantity of business that we write and the level of refinance volume.
Okay, got it. And just wanted to clarify, is the profit commission, is that calculated off of incurred losses as opposed to paid? And if you actually start to see favorable development, because you're seeing, you know, more favorable roll rates on some of these, you know, forbearance loans, would we expect that to come back through the premium line?
Yes, the profit commission is computed based on incurred losses. And If in the future, the actual ultimate losses are lower than the incurred losses that we're estimating today, that would have a positive impact on profit commission in the future. We would be able to quote unquote recapture that. But I would just point out that in either case, we get the benefit of the reinsurance. We either get it as a seeded loss benefit, including a seeded paid loss, or we get it as profit commission benefit. It does impact the line items that things show up on, but on a net income or pre-tax income basis, it doesn't have as big an impact.
Okay. Got it. Thank you.
And your next question comes from the line of Mihir Batia from Bank of America. Your line is now open.
Hi. And thank you for taking my questions. Good morning. Just wanted to actually wanted to follow up on the question on portfolio yield, maybe focusing just a little bit on the in-force portfolio yield. So yes, given the higher quality of the business you've been writing in 2020 and the volume, does that argue for the pace of decline that you saw this quarter to persist for a bit? I understand you get the capital benefit. and the lower losses in the future because it's higher quality business. But to the extent the housing market and NIW stays strong, the quarter, quarter pace, I think a couple of these, like you went from 0.48 to 0.46, we should expect that to continue here in the near term for the next couple of quarters.
Amy here, it's Nathan. I think similar to what I mentioned previously, I think a lot of that comes down to your assumptions about the volume of business that we write in, say, the fourth quarter or the next six months. It also impacts, a big impact there is what are the expectations around cancellations of the existing end force or what, you know, persistency rate. So I think if we experience, you know, if we experience the level of new business writings that we, you know, did this quarter and also the level of cancellations that we did this quarter, then I think you could expect something on that order of magnitude. It also matters which loans are canceling. So there are a lot of impacts. It makes it, I think, directionally, we've said over time we do expect that trend to continue lower, but that the pace of the change is a function of a lot of other assumptions that you have to make. It makes it really hard to forecast even a one-quarter change, but certainly over a longer period of time.
Okay, understood. No, that's helpful. Thank you. Maybe switching gears a little bit, for your loans and forbearance, can you share any statistics or any additional color on them? Just for example, what percent of them have under 10% equity? Does the forbearance pool look like the rest of your book? Any differences in particular that are worth calling out among the forbearance loans? versus maybe regular delinquent. And also, at this point, I think you may have a few loans that have, you know, cured out of the forbearance pool. Is the early, I guess, performance similar to what you're seeing, what you would have expected from your regular performance book, or is it a little bit weaker than the regular? Like, are there already loans that are re-delinquent or anything like that you can share on that?
Hey there, it's Mike. So, give you several, you know, differences. you know, some color, if you will, on the forbearance inventory. So starting on the cure activity or the composition, I'd say it's pretty representative, you know, when you look at by book years, you know, LTVs, et cetera. It's pretty representative of the recent writings and mix of business. Now, the mark-to-market LTVs overall, you know, the, you know, You've got to be careful, right, with mark-to-market LTVs. As Nathan was responding to a question earlier about, you know, we get claims even in strong HPA markets. But using, you know, kind of that CBSA-type level and doing mark-to-market LTVs, you know, close to 85 percent of it is below 90 and 60 percent is below 80, you know, on a mark-to-market basis. Obviously, we don't know the presence of any seconds, you know, that may have been in place there. And it's pretty similar whether it's forbearance loans or non-forbearance loans when we're looking at a kind of delinquent inventory, not just on forbearances. You know, as far as cures, we look back at the inventory as of the end of June and then said, you know, how many of those cured as of the end of September? And we're looking at about 40%. These are loans that went into reported forbearance as of the end of June. About 40% of those cured through actually 40% through the end of October, about 30% through the end of the quarter. We are seeing loans that leave forbearance, a small percentage that leave forbearance and remain delinquent, but we're also then seeing a sizable portion of that small percentage that make a payment. So they're kind of staying in the one to three months. So we're seeing different levels of activity, but relative to the characteristics, representative of the portfolio, I would say. The performance, hard to gauge. We haven't had this level of forbearance reporting, so we're really just building the database how forbearance loans behave. But just giving you some of those characteristics anyway.
No, that's helpful. Thank you. And my last question, just on your near-term capital strategy. So this quarter, you got approval to dividend the 9% junior notes to Holco. Should we take that as an indication that there is openness from the department to allow you to dividend, to resume quarterly special dividends in the future, or was it just because it was the junior notes? That's materially different than how they would view a cash dividend, if you will. And then also just related to capital strategy, in your 10K, it looks like you amended your language around repurchases and said you may resume them in the future this quarter. I don't think that was their last quarter. So should we read anything into that? Maybe also just talk about the right level of excess capital you're targeting in this environment. Thank you.
I'll take the easy one. This is Mike, and I'll let Nathan talk to the capital. On the language in the 10Q, you did see the words that changed there, but really it's just it's the same intent and same thing we said before. We temporarily suspended. Temporarily suspended means that we could repurchase, so we just wanted to, you know, in the future, so we just wanted to clarify that statement that we made previously that the share repurchase has been temporarily suspended, but that we could restart it going forward. So don't read any more intent to that than just reiterating our intent there. Nathan, I'll let you go next.
Yeah, the question about... the transactions in the third quarter and maybe what that means for dividends from the writing company going forward. I would just say I think we're really pleased that we were able to get the approvals that we needed for both the merger of MRCW and also the intercompany in-kind dividend of the junior debentures. Those required approval not just from the Wisconsin OCI, but also the GSEs, so I think I think really happy with the relationship in all those places and our ability to, I think, execute thoughtful, prudent transactions. What that means for dividends, I think we don't expect to request a cash dividend in the fourth quarter. What that means for the first quarter, I think it's probably a little too early to say at this point. I would remind you that any dividends at this point through dividends March 31st would also require approval of the GSCs. And we also have $870 million in cash at the holding company. So we have enough flexibility there that, um, dividends from the writing company, you know, we have, we have sufficient cash at the holding company to do any number of things without needing dividends from the writing company in order to affect that. So, um, just, uh, you know, maybe a couple of thoughts there, but, you know, just, uh, maybe a reminder that our transactions did require approval. I think that's a reflection of the fact that they made sense and the fact that we've maintained good relationships both at the OCI and the GSEs. So I'm hopeful that if we have a thoughtful, prudent request that we'll be able to get the approvals that we need in the future. It really comes down to what is that request, and it's probably a little too early to say at this point.
Thank you. Thanks for taking my question.
And your next question comes from the line of Jeffrey Dawn of Dowling and Partners. Your line is now open.
Thanks. Good morning. First question. Can you share your thoughts about basically January and beyond, a world where new notices don't have a forbearance option? Given the economic uncertainty, does it make sense that incidents would be higher than a normalized level or can the economic environment be offset by how strong housing has been? How would you frame the prospect, for instance, once the forbearance options go away?
Jeff, I guess I'll start on it. It's tough to say. One thing I would say is I wouldn't assume that there won't be forbearance options out there. I think a lot of it, quite frankly, has to do with what the path of the virus takes. I guess my view is If things are more strained and there's higher impact on the economy, I guess I would assume that there's going to be similar response to what we saw earlier this year. If the economy is sort of doing better, the virus is more controlled potentially, and sort of our delinquencies ultimately that are maybe less muted or more muted, that sort of having that sort of the the forbearance is not as big of a deal so i think what we've tried to do from a from a planning standpoint from a capital standpoint is is be ready for all those situations we see feel like we have a strong capital position to handle whatever that could be but i would think if there is a concern of a second or third wave and it was impacting sort of housing and delinquencies I would expect you would see some response there and would say that end of December sort of what looks like a clip right now might not really be a clip on new delinquencies.
Okay. Nathan, can you talk to the investment portfolio? The environment obviously continues to weigh on the yield. So given the duration, where we are into this cycle, if rates and spreads remain consistent for the foreseeable future, how much more pressure could we see on the yield?
That's a good question. Certainly our purchase yields in the third quarter were quite a bit lower than the in-force portfolio yield. So that does weigh on things. And then we affected a number of things this quarter that didn't help that yield number as well, generating the cash at the holding company with the debt issuance. And frankly, just holding a lot more cash at the holding company at this point, a lot more cash in investments, which has always been a lower yield, higher credit quality, shorter duration portfolio, just given the uses of cash at the holding company compared to the operating company. So I do expect that the premise of your question was if rates and spreads stay where they are today, I think given what we invest in, you're looking at purchase yields that are below our enforced yield for a while and a decline in what that enforced yield looks like for the next several quarters.
Any way to frame how much additional pressure we can see?
Because of the operating company, holding company dynamics, I think it's a really good A good question, something that we could clarify a little bit better. I would be hesitant to provide an overall number because I think the dynamics of the different portfolios had a really big impact in the quarter. So that's something that we can take away and try to provide more information on in the future.
Okay. And the last question, excluding seating commissions, your gross expense expenses picked up pretty notably it looks like double-digit year-over-year is that just largely incentive comp related to market conditions and can we still expect a pretty benign growth rate on expenses generally going forward Jeff I think you can expect a pretty benign from expense standpoint you have to look back at the details a little bit you know
a lot of moving parts from incentive comp and, you know, sort of comp in general benefits. But I would say, you know, we've tried to be vigilant in this time on expenses while still trying to maintain the focus on making sure we are ensuring sort of long-term, you know, sort of not just viability but being able to thrive in the long term. But I think it's been prudent to make sure we focus on it short term. But I think the right way to think about it is still sort of, flat, definitely not higher than that as we move forward.
So you could, you envision relatively flat expenses for 21 as well?
Yeah, Jeff, Nathan, just to clarify, you said up double digits year over year, just trying to maybe reconcile back to the numbers that you're, I had us at about 59 million in both periods, but it sounds like you have different figures.
Yeah, I'll follow up online. Maybe it's just how I'm backing out the Seating Commission.
Okay.
All right, thank you.
Thanks, Jeff.
And your next question comes from the line of Phil Stefano from Deutsche Bank. Your line is now open.
Yeah, thanks and good morning. I think in the prepared remarks there was a comment and probably once in the Q&A as well that the refi activity continues to remain relatively steady. I was hoping you could just give us some commentary around does persistency continue to be pressured or look similar to mid-2020 in the near term? And at what point do refis slow down even though rates are at these historic lows?
Well, uh, uh, so Mike started with a reverse order, you know, relative to, you know, market conditions. I mean, when you look at the spread, you know, the margins over the 10 year and look at where those spreads are at today versus historic, you know, averages, they're still quite a bit wider, um, than normal. Um, so, um, even if rates, you know, stabilize. or even go up a little bit, lenders have the ability to adjust that margin over the 10-year note rate. So difficult to say, but I think that's why we suggested that we would think refinance transaction would continue to be pretty prominent in the marketplace. For us, it's still the lesser amount of the business going forward. You know, it's been – you know, it bounces around. You know, we're in the – probably in the – you know, between 30% and 40% at any given month can be refinance volume, really depending on the lenders, you know, that do business with us in that particular period, the conversion rates, et cetera. So I think, in general, persistency, staying pressured is the right way to think about it. you know, given, you know, where rates are at. But I think you've really got to follow that. If rates drop lower, we could see persistency go lower, but that should create market opportunity on the other side from an NAW perspective.
And as the persistency is pressured, is there any way you can help us think about the benefit from accelerated singles? I mean, presumably that would remain elevated in this period as well?
Well, yeah, I think so. Now, you know, the proportion of singles, and anyway, if I look at what's left, you know, of our singles population, because it's noted earlier, we've been writing less of that over recent periods, not just this quarter, but over the last year or two. So all things equal, yes, but the relative size of the singles population is also dwindling.
Got it. Okay. And looking at reinsurance, it seems like, from what I saw in the queue, that the quota share session percentage is down pretty meaningfully, something from 30% to the mid-teens for the 2021 treaty. Is that something that you are still contemplating adding people to the panel, or is mid-teens the new way to think about the session percentage for the quota shares moving forward?
Phil it's Nathan, um, just, uh, maybe a point of clarification, the 17 and a half percent for 2021 was actually a two year agreement that we entered into with a panel of reinsurers, uh, at, at the end of 2019. Um, so we also had a, an additional, um, you know, set of one year reinsurers that got our total quota share for 2020 up to that 30% level. We are in kind of early stage discussions with reinsurers about their appetite and what the opportunity is to build on that 17.5% for 2021. So I don't have any update at this point. But I wouldn't view that as necessarily the level for 2021. It's something that we'll talk about with reinsurers and see what the market is.
Got it. Okay, understood. That makes sense. Thank you.
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Sure. I just want to thank everyone for their interest in MGIC, and I hope you and your loved ones are happy and healthy. Thanks, everyone.
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