Adam Pollitzer: We don’t have anything immediately on the horizon. We’ll be curious to learn more about the Enact announcement. It is a path that some others in our sector have pursued. Right now, we find the best value of deploying our capital to be in support of our primary business. We continue to grow our customer franchise. We continue to grow the opportunity that we’re able to support and that remains our focus for now.
Operator: Next question will come from Eric Hagen with BTIG.
Eric Hagen: First question here. I mean, how do you feel like homeowners are keeping up with inflation at this point, especially the borrowers with high DTI to begin with? I realize the macro data suggest one thing, but is there anything that maybe you’re adjusting for at the portfolio level? And how do you maybe adjust for the risk that inflation stays higher for longer, if you will?
Adam Pollitzer: Yes, Eric, it’s a good question. Look, I think first and foremost, these are, among other items, ones that we account for from the standpoint of both pricing as well as actively managing the flow of risk and the mix of that risk coming into our portfolio. One of the risk markers that we consider both in — on a stand-alone basis, but also how it interacts with other risk markers is a borrower’s debt-to-income ratio, which is essentially a household coverage metric. And we price for higher DTI borrowers in expectation that we’ll see higher claims activity for those borrowers because their household finances are a bit more stretched. And we also actively manage the concentration of risk coming through. And so like all other risk markers, like all other risk factors that are out there, we manage for it in a few ways.
We try to price for it for the risks that we’re comfortable taking. We define what our risk appetite is and try to manage our mix such that we don’t exceed that. And then we also pursue reinsurance consistently to make sure we don’t have an outsized aggregation in the portfolio.
Eric Hagen: Yes. That’s helpful. What would you maybe identify at this point as a few of the stronger catalyst for first-time homebuyers at this point? I think you guys mentioned the expiration of student loan forbearance. Are you thinking that could have a bigger impact on the existing book or the forward opportunity as some borrowers might not be able to qualify or just how are you guys thinking about that?
Adam Pollitzer: Yes. Look, I’d say it’s obviously pretty new. What I’d say broadly is we’re watching it right now, particularly because we’ve got an election cycle coming up. I think the Biden administration has a clear vested interest in ensuring a smooth transition for borrowers and is taking steps to ensure that, that transition is seamless. To that end, we’ve seen several important announcements, both from the administration as well as from the Department of Education in the month or so since the Supreme Court ruling came out, striking down the original student debt relief program. And so we’ll see. It is possible that the upcoming resumption of payments will have an impact on certain borrowers in our portfolio who perhaps budgeted expecting more permanent relief.
From an overall credit standpoint, though, we don’t expect at this point that the restart of student loan payments will have a material impact on the performance of our portfolio. As for the potential impact on new business activity, I’d love to give you a specific answer, but admittedly, it’s difficult to tell. On the one hand, you could see an even greater need for private MI support before with borrowers who now have to make additional monthly payments towards their student debt, not able to save as much for a down payment as previously hoped. But you could also see some pressure the other way with borrowers who were already stretched by higher rates and house prices now pushed to either look at less-expensive homes and it’s the loan size that drives NIW or perhaps being moved out of the buyer market entirely.
