And as we move forward, we’ll basically continue to look at that capital and our commercial success in the GSE CRT market to make sure that that entity has the right amount of capital. It is important to emphasize and we said it in our prepared remarks, that we structured this entity in a very capital efficient way, both from PMIERs and from statutory policyholder surplus. So that allows us to actually achieve scale to Dean’s point, achieve A- rating, write business on an accretive basis at attractive risk-adjusted returns, and then at the same time continue our balanced focus on return of capital to shareholders, which was evident with the announcements we made.
Unidentified Analyst: Great. that makes sense and thank you so much for taking our questions.
Rohit Gupta: Thanks, Alex.
Dean Mitchell: Thanks, Alex.
Operator: One moment for your next question. and the next question comes from the line of Rick Shane with JPMorgan. Your line is now open.
Richard Shane: Thanks for taking my questions. Most have been asked and answered, but I’d love to talk a little bit about the cadence of the second quarter and implications as we move into the third. We did hear that as we moved through the quarter, mortgage originations did slow month after month and I’m curious if that’s what you saw, and if that’s continued, I guess we are now in August so through July as well.
Rohit Gupta: Good morning, Rick and thanks for the question. in terms of this goes back to my point on trying to predict origination market size this year, I think, we are seeing consumer behavior being very well-aligned with two things; one is historical seasonality that consumers buy more homes during the spring selling season. So, we are continuing to see that as I said in a previous response, that we saw an increase in purchase originations and we attribute that to seasonality and that consumer behavior. The second thing is there is an aspect of consumers either coming to market or staying on the sidelines based on where mortgage rates are. I think this is a little bit of unprecedented time that we see significant volatility month to month in 30-year mortgage rates by the fact that 10-year treasury yield is moving in a pretty wide band.
And on top of it, we have a historically high spread between 10-year treasury yield and 30-year mortgage almost standing between 270 basis points to 300 basis points. So, when you combine those two factors and you say like mortgage rates are let’s say, 6.8%, at that point we generally see and we hear from our customers when I’ve talked to CEOs of certain mortgage companies recently, they generally see higher than 6.5% 30-year mortgage rate. It slows down activity between 6% to 6.5%, I think activity is a little bit stronger. and then anytime we are in the neighborhood of 6% for 30-year mortgage fixed rate or slightly below it, I think more and more consumers are coming to market and they see that as a deal. So, if you compare that to 2022, that’s a net positive, because I think 2022 especially middle of 2022 was a year when people were seeing a sticker shock.
They were used to a 3% mortgage rate and they started seeing 6%. I think right now, a 6% is more well accepted in the market. but then the range around it kind of guides people’s participation in the market. Hope that helps.
Richard Shane: No. it’s very helpful. And just dimensionalizing it in that way makes a big difference. One other question, what was the PMIER’s credit again, I know you’d mentioned I think you said $1.5 billion. Do you have it with precision? I just wasn’t able to find it in the disclosures.
Dean Mitchell: Rick. Hey, it’s Dean. It’s actually in our QFS on page 14. I think it’s 1.524, I can read my own handwriting. And it’s the sum of PMIERs required asset credit down in the middle of page 14.
Richard Shane: Terrific. Thank you so much.
Dean Mitchell: We actually don’t sum it. You’ll have to do the math, I apologize for that. But it’s the sum of that line.
Richard Shane: Hopefully, my excel will be able to pull it together for me. Thanks, Dean.
Dean Mitchell: Thanks, Rick.
Operator: One moment for your next question. And next question comes from the line of Eric Hagen with BTIG. Your line is now open.
Eric Hagen: Hey. thanks. Good morning. Maybe, following up on that actually really quickly, would you say that there are any thresholds you think about for your capital ratios, which could either lead to higher or lower capital return than what you guys have guided to? Thanks.
