Mihir Bhatia: Got it. Thank you for taking my questions. I’ll get back in queue.
Operator: Your next question comes from the line of Rick Shane with JPMorgan. Your line is open.
Richard Shane: Good morning, guys. Thanks for taking my questions. Look, we’re in a unique environment, the purchase is at historically high percentage of mortgage originations, given the constraints in homes for sale, new home purchases are disproportionately high as a percentage of purchase volumes. That means that a great deal of originations are being driven by homebuilders. Can you talk a little bit about how that impacts the business, how you look at things like rate buydowns provided by the builders, whether they’re temporary or permanent and shifts in terms of how you work with builders to drive business?
Rohit Gupta: Yes. Thank you, Rick. So I’ll take this question. I think from our perspective, first, we agree with your points in terms of origination market being impacted by higher rates as well as broader inflation. And in this market, obviously, given the number of consumers who are locked in at very low interest rates, we also have a tight inventory, which means there is more focus on new homes and those new homes are basically driving more of the origination market. So first thing, from a market participation perspective, that is a good thing for our business. As you know, private mortgage insurance is much more tied to the purchase market, and that essentially means that gives us a bigger origination market to participate in and also provides new inventory.
Now coming down to builder performance, our builder portfolio performance kind of from both perspectives, recent performance and historic performance has been very similar to our overall portfolio, specifically on the topic of rate buydowns, we look at those programs, each program at a time and approve it for our own guidelines. And essentially, we see the same performance, consumers are appropriately qualified, there are no payment shocks. And I know that there has been a topic of permanent rate buydowns discussed. We don’t see a prevalence of permanent rate buydowns, we see more short-term rate buydowns, 1 year, 2 year, which are more economical for a mortgage originator to fund compared to a permanent rate buydown and the way the consumer is qualified, that gives us kind of a good performing and well-qualified loan on our books.
Richard Shane: Okay. And so what you’re suggesting is that to the extent you’re seeing rate buydowns from — on loans available through either the originators or through the homebuilders that proportionately, you’re seeing more short-term buydowns as opposed to permanent buydowns.
Rohit Gupta: Yes. We are seeing short-term buydowns and even for those short-term buydowns, the consumer is actually qualified at the full note rate, not at the bought-down rate. So if a consumer had a 1% buydown on upfront, the consumer is still basically being qualified at the prevailing market rate.
Richard Shane: Got it. Okay. Second question, and this is a follow-on to that. To the extent, the industry is — the mortgage industry is increasingly concentrated around developments from those builders, is there any concern — like if you think about purchase volume ordinarily, it’s going to be very disparate across the country, fine, we’re going to see regional concentrations due to migration. But is there anything within your model that says, okay, wait a second, if we’re increasingly focused on these 25 or 100 developments that we’re creating more correlation risk within the portfolio.
Rohit Gupta: Yes. So I would say in terms of concentration down to that level, we track our concentration at a state level, at an MSA level. As we have said in the past, we also have an ability to price our loans on an ongoing basis, down to the MSA level, and we do. And that view is driven by the economic conditions in that city, in that MSA, both on a current basis and our view moving forward, and it includes a view into home prices and housing conditions, I would say, in terms of tightness of inventory or too many homes coming to market. We subscribe to several different market views to make sure that we have a pretty well-rounded view down to the MSA level, and that’s how we control our appetite. I don’t believe that we see our concentration in specific developments kind of controlling our risk appetite because by the time our share of that development shows up on our books, you’re talking about like MI penetration on purchased loans is somewhere between 20% to 25%, and we have 16% to 18% of that portion, we are talking about small numbers of loans that actually make it to our portfolio from any specific development.
And in the builder segment, I would say, our participation is very proportionate to our overall share. So it’s not that we are taking on a specific subdivision for a builder and ensuring a lot of loans down to that level.
Richard Shane: Got it. Okay, thank you very much.
Operator: And your next question comes from the line of Eric Hagen with BTIG. Your line is now open.
Eric Hagen: Good morning. A couple of follow-ups here. I mean, how much did the recent increase in interest rates, you feel like play a part in the level of the special dividend that you just declared? And then can you share what kind of returns do you think you’re getting in the GSE CRT deals? And maybe just how much capital you feel like it could be directed there next year?
Dean Mitchell: Let me start off, Eric. So as it relates to the interest rate environment and the special dividend, I don’t really think those are highly correlated. I don’t — I’m failing to see the correlation. I think really, more than anything, I’ll go back, I think it was Bose’s question on mix of returns of capital and the special dividend was really sized based on the opportunity we saw in the share repurchases that was much more directly attributable. Interest rates, obviously, I guess if you — maybe tying that question to an earlier question, when we think about how we’re thinking about returns of capital in the future, interest rates are certainly part of our economic view, our prospective economic view that affect both the macro as well as our view of our expectations around business performance. So maybe that’s the connection that you’re trying to draw. And I think in that case, as we look forward, that will certainly be a consideration.
