And the borrower loses in that. So I think the industry, we’re always going to put the borrower first. We do it on the MI side, we’re going to do it on the title side. And I think that’s where the noise is coming from. And I think that’s the root cause of the problem. And I think as the industry starts to think through that and until the industry really tries to solve that problem, there’s always going to be workarounds. That’s how it ends. And so that’s why you see AOL and title waivers. Those are workarounds because lenders — and we talk to lenders every day, Soham, we understand it, they’re frustrated by it and they’re looking for ways to get around it. So I think the title insurance industry longer term has to kind of come to grips to that.
And when they do, I think it’ll be fine. I think it’s a valuable product and I think the industry has a really bright future.
Soham Bhonsle: All right. Thanks a lot, Mark.
Operator: Your next question comes from the line of Melissa Wedel from J.P. Morgan. Your line is open.
Melissa Wedel: Good morning. Thanks for taking my questions today. I’m on for Rick this morning. I was wondering if you could talk about how you’re thinking about the current vintage. I know you referenced sort of the health and the credit metrics of the portfolio. There’s a lot of embedded HPA that really is supportive of credit. In this environment, we’re seeing lower affordability. It seems like there are fewer tailwinds in terms of employment. Employment will be getting better from here is sort of our base case assumption. But as you look at new business in this environment, what do you think — how much higher risk is embedded in this current vintage, do you think, compared to sort of the rest of the portfolio?
Mark Casale: That’s a good question. I would say, just big picture, we’re pretty comfortable with the new writings. I know clearly, with rates kind of close to 7% and home prices have been quite elevated, they haven’t really grown that much. They’ve grown a little, but they’ve been relatively flattish. I would say, if we’re going to pick on vintages in general, we’re talking about, again, like I said, 14,000 defaults. I would say the 2022 vintage is the one we probably look at the most, just because that was done almost at the peak of HPA and our pricing was the lowest. That’s when we had talked about we had really low share at the end of ’21, early ’22 pricing and we really bottomed out and increased materially from that point on.
So just from a unit economics basis, that’s probably the one that we’ll look at the most. It’s actually performing pretty well. But I mean, just from an incurred loss ratio, it’s probably a little bit higher. I would say with the new book we’re not — we’re pretty comfortable with the unit economics of the book. Is it going to be — could it be a touch riskier than others? Yes, but also I think we’re being compensated for that from a price standpoint, so.
Melissa Wedel: Okay. Understood. Follow-up question is a little bit tangential here, but I would imagine that a fair number of the borrowers that you’re insuring would also have some student loans. And I’m just wondering if you’re — do you have visibility into that? Are you seeing any impacts to credit from either borrowers benefiting from forgiveness or delaying payments? And is that a — any risk of that being a potential headwind as borrowers begin to repay? Thanks.
Mark Casale: We have not seen it as a headwind, and I think we pointed out in a call, I think it was last quarter, that given through EssentEDGE, we’re actually able to kind of differentiate borrowers that have student loans with ones that have identical FICOs. One cohort with student loans, one cohort with personal loans, like the old fashioned consumer finance. The student loans actually perform better. And that could be a number of different — you’d have to almost guesstimate why, what’s causing that. So I think there — that’s — from a student loan standpoint, that’s probably a good nugget for investors. But in terms of like the added burden of repaying student loans, we have not seen that impact.
Melissa Wedel: Thanks, Mark.
Operator: [Operator Instructions] Your next question comes to the line of Mihir Bhatia from Bank of America. Your line is open.
Mihir Bhatia: Hi. Good morning, and thank you for taking my questions. I wanted to follow up a little bit on a couple of the answers you gave, Mark, in terms of just — look, you highlighted Essent has performed well in a variety of macro market backdrops over the last few years. I think you’ve also mentioned today and on previous calls that credit is your number one long term concern, managing credit is job number one. Right? So I guess just trying to understand what can go wrong at Essent from an external perspective, right, assuming you’re doing everything right internally. I think one of the questions that we get a lot of is this is like such a great operating environment, from an external perspective, things can only get weaker.
I think in the earlier question, too, there was like the job environment getting weaker. Is that what we should be focusing on, the job environment getting weaker? I’m just trying to understand what is the big risk from an external perspective for Essent?
Mark Casale: Yeah. It’s a good question. We’ve heard this question for 10 years, like what can go wrong, and again, I do think we’re clearly levered to unemployment. We never promised on our IPO roadshow to run the company recession-free. I think what we do here is try to plan for both from a business and a balance sheet perspective, a range of economic scenarios. And as I pointed out earlier, that’s just — that’s the most volatile is the provision, right? Because it is so leveraged on unemployment. So, yeah, if unemployment goes up, here’s a new flash. Our provision is going to go up, right? And we saw this in 2020. And we saw almost a flash flood, so to speak, in terms of — because we saw such a sudden increase in defaults in the second and third quarter.
And if you look back on 2020, we still made money. And so I do think, at the end of the day, we’re built because of all the changes to provide consistent earnings throughout the cycle. That doesn’t mean they’re always going to go up. There’s going to be certain years where they’re not going to perform as well because of the provision. But the prevailing view of the MIs, and I would say a dated view, was the companies are going to crumble when there’s an issue in the economy. And that’s just simply not true. I mean, it’s reflected now in our ratings. We’re A rated across the board. So the rating agencies, obviously, we go through a lot of stress tests with the rating agencies, whether it’s the GFC or different scenarios, and we come out and we don’t really deplete any capital.
And that’s the — in a financial services company, when they deplete capital, there’s really not a bottom for your valuation. And I would point to, again, 2020. So when that hit and our stock dropped significantly during the March and April timeframe, our ability and the fact that we had reinsurance actually put a floor on the stock and some smarter investors jumped in. But if you saw, we traded well below book in 2020, I want to say 60-ish-percent of book, believe it or not, for a week or two. As we talked to investors and kind of walked them through how — because no one really cared about the reinsurance until they cared. Right? I mean, we were getting questions in February of ’20 around growth and then in March of ’20, everyone was worried how losses were going to be.
So it just shows you. But as we were able to talk to investors about the reinsurance and how hedged it was, you saw that the stock price started to climb back towards book. We use that because of the uncertainty in the environment. We use that as an opportunity to raise more capital. Right? I mean, we’re in this business longer term. We’re an insurance company. So we took any — we felt like we could get through the great financial crisis, given how we were structured. We weren’t sure at the time if we could get through a greater financial crisis and no one knew in April and May of 2020. So we used that as an opportunity to strengthen our balance sheet. I would argue if we didn’t have reinsurance, that would have been very difficult. It would have been very difficult to predict the bottom.
We were able to show investors where the losses would be. And so yeah, I think you’re going to get those questions. How good can it get? It’s pretty good. And I would say, we are very pleased with the balance of the business. So when rates are down — what’s going to happen when rates go down? Are yields going to go down a little bit? For sure, although higher for longer, longer may be a view, but say our investment yield goes down a little bit, persistency will certainly go down. The book’s going to grow. We’re going to end up doing a lot more NIW. Probably the title side is a little bit more levered to lower rates, and rates are up. And when the rates are up, again, look where the persistency is, the higher investment yield. So I think we’re well balanced.
I would point out some of the mortgage services are in an equal position if you’ve seen some of their performance, given the strength of their servicing portfolio. So yeah, you can always — I mean, there’s always going to be things that you can point to, but I would say I would point to the balance of the portfolio and not get too caught up in if there is kind of slowness, does that really hurt the company longer term. I don’t believe it does.
Mihir Bhatia: Got it. No, that’s helpful. Interest rate buy downs and other programs that are being put in place to help with affordability, how are you thinking about those? Is that a factor in your pricing or not, I guess either pricing or in your credit scoring?
Christopher Curran: Hey, good morning, Mihir. It’s Chris. As far as the buydown activity, we’re pretty consistent in the first quarter with the first quarter of last year relative to the amount of buydowns. And we’ll call it the temporary buydowns that we are seeing. I think from a performance standpoint, even from temporary buydowns that have reset, we continue to actually be pleased with the performance of the temporary buydowns as compared to our entire portfolio. From a pricing standpoint for us, I mean, don’t forget these loans are underwritten to the gross rates. I’ll call it to the gross coupon. So from an underwriting perspective, we’re comfortable with the production and then certainly from a pricing perspective, it really goes back to EssentEDGE and how we leverage the data, the credit data for the borrower themselves versus the rate on the note.
Mihir Bhatia: Okay. Got it. And then just my last question. Mortgage market size for the year, I guess the MI market size and even — I mean, what are you hearing from originators as we enter this better housing or seasonally better housing season here?
Mark Casale: Yeah. I mean, I don’t think you’re going to remember historically, except for certain periods, there’s usually a bell curve to origination. So lower in the first and the fourth and they kind of peak in the second and third. I don’t think you’re going to see much of it, a bump this year just given where rates are and the lack of supply. I would say overall, I think the origination market that we’re seeing from Fannie is probably a little bit optimistic. And remember, some of that came from kind of the pivot in the fourth quarter and now again, it’s back to higher for longer. I think in terms of the NIW market, I would say 2.50-ish to 2.75. I see that as kind of the market for this year, which again is fine. It just means persistency will probably stay a little bit more elevated like we said in the script.
But yeah, I’m not — I would have thought depending where rates go, maybe later in the year, and it’s obviously dependent on the election and outcome. You’re probably going to see more of a normalization in ’20 and ’25 and 2020 and 2021 were such an anomaly. You’re seeing the impact of that on the ’22 — on the ’23 and now the ’24 kind of origination market.
Mihir Bhatia: Got it. Thank you. Thank you for taking my questions.
Mark Casale: Sure.
Operator: Your next question comes from the line of Bose George from KBW. Your line is open.
Bose George: Hey, everyone. Good morning. Just have a couple of follow-up questions. In terms of your cure rates, you guys in Exhibit K, you give the cumulative cure rate. So back — so March 2023, I guess now is 91% of that is cured. Like if you roll back further, so say for example, March 2022, what does that number look like? Where does that get to for those earlier loans, vintages?
David Weinstock: Bose, thanks for the question. Don’t have those numbers right at our fingertips. And probably Phil could follow up with you and Wei afterwards. But it’s going to — as we continue to grow out, we continue to have cure activity from all the vintages of defaults. And so they’re going to be higher. They’re going to be in the mid to upper-90s. But I don’t have those numbers at my fingertips.
