What changed in this filing

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Item 1A. Risk Factors

2025-02-14 compared with 2024-02-15 · 73 added, 82 removed, 622 unchanged (20% of the section changed)

25 unchanged sentences

• If the estimates we use in establishing claims reserves are incorrect, the actual claim payments we make may materially exceed the amount of our corresponding claims reserves, resulting in unexpected charges to income, which could be material and adversely affect our results of operations.

• The COVID-19 virus may continue to impact our financial results and may also continue to affect our business, liquidity and financial condition.

• The occurrence of natural or man-made disasters or pandemics could adversely affect our business, financial condition and operating results.

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• The market price of our common stock could decline due to the large number of outstanding shares of our common stock eligible for future sale, and future issuances of our common stock may depress our share price and dilute the book value of our common stock.

• Future issuance of debt or preferred stock, which would rank senior to our Class A common stock upon our liquidation, may adversely affect the market value of our common stock.

• Future issuance of debt or preferred stock, which would rank senior to our common stock upon our liquidation, may adversely affect the market value of our common stock.

• Provisions contained in our organizational documents, as well as provisions of Delaware law and Wisconsin insurance law, could delay or prevent a change of control of us, which could adversely affect the price of shares of our common stock.

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With six private MI companies actively competing for business from the same residential mortgage originators, it is important that we continue to differentiate ourselves from the other mortgage insurers, each of which sells substantially similar products to ours.

We may experience increased competition due to consolidation among our existing competitors or the emergence of new private MI companies.

One or more of our competitors may seek to capture increased market share from the government MIs or from other private mortgage insurers.

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Some may have better financial strength ratings than we have.

As a result, they may be better positioned to compete in and outside of the traditional MI market, including when the GSEs pursue alternative forms of credit enhancement or credit risk transfer other than private MI, such as their IMAGIN and EPMI programs that were suspended in 2021, but could be relaunched in the same or alternative form in the future.

Our financial strength ratings are important for our customers to maintain confidence in our products and our competitive position.

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These programs have included the use of structured finance vehicles, obtaining insurance from non-mortgage insurers, including off-shore reinsurance, engaging in credit-linked note transactions in the capital markets, or using other forms of debt issuances or securitizations that transfer credit risk directly to other investors.

The growing success of these programs and the perception that some of these risk-sharing structures have beneficial features in comparison to private MI ( e.g.

, lower costs, reduced counter-party risk due to collateral requirements or more diversified insurance exposures) may create increased competition for private MI on loans traditionally sold to the GSEs with private MI.

If any of these programs successfully grow in comparison to private MI, it may create increased competition for private MI on loans traditionally sold to the GSEs with private MI.

During the 2008 financial crisis, the government MIs, principally the FHA and VA, captured an increasing share of the high-LTV MI market.

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The degree to which lenders or borrowers may select these alternatives now, or in the future, is difficult to predict.

As one or more of the alternatives described above, or new alternatives that may enter the market, are chosen over MI, our revenues could be adversely impacted.

As one or more of the alternatives described above, or new alternatives that may enter the market, are chosen over MI, our revenues

could be adversely impacted.

The loss of business in general or the specific loss of more profitable business could have a material adverse effect on our financial position and operating results.

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• the rate and anticipated path of home price appreciation, which in times of heavy refinancing can affect whether refinance loans have LTVs that require MI;

• deductibility of mortgage interest or other changes in tax policy, including the TCJA of 2017, which may have an effect on the residential housing market;

• deductibility of mortgage interest or other changes in tax policy, which may have an effect on the residential housing market;

government housing policy encouraging loans to first-time homebuyers;

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• the extent to which the GSEs' guaranty and other fees, credit underwriting guidelines and other business terms affect lenders' willingness to extend credit for high-LTV mortgages.

• COVID-19 and any related imposed containment measures.

A decline in the volume of high-LTV loan originations could decrease demand for MI, decrease our NIW and therefore reduce our revenues and have a material adverse effect on our operating results.

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The frequency and severity of claims we incur is uncertain and depends largely on general economic conditions, including unemployment rate, interest rates, inflation and the effect of the Federal Reserve's action to control inflation (which could lead to potential economic downturn), and trends in home prices.

These risks may also be impacted by developments relating to the COVID-19 virus in the future.

To the extent that certain risks are unforeseen, or if we have underestimated the frequency and/or severity of loss of certain risks, our underwriting and credit risk management policies and practices may not be sufficient to mitigate the effects of these risks.

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Rising unemployment rates and deterioration in economic conditions for extended periods of time, across the U.S.

or in specific regional economies (such as the wave of layoffs in the technology sector in the recent past), generally increases the likelihood of borrower defaults.

or in specific regional economies, generally increases the likelihood of borrower defaults.

As inflation has lowered housing affordability, the use of adjustable-rate mortgages (ARMs) and interest rate buydown transactions have become more common.

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Consequently, loans in these regions will experience higher rates of default, foreclosure and loss than on loans nationally, and struggling borrowers in regions with an oversupply of homes may be unable to sell their homes as a means to avoid foreclosure.

on their insured loans may increase the likelihood and severity of our losses, which could have a material adverse effect on our financial condition and operating results.

Any deterioration in housing prices, housing markets or economic conditions in regions in which we have a significant concentration of IIF and which adversely affects the ability of borrowers to make payments on their insured loans may increase the likelihood and severity of our losses, which could have a material adverse effect on our financial condition and operating results.

The premiums we charge may be insufficient to cover claim payments and our operating costs.

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• cancellation of BPMI mandated by the HOPA, with the time-frames for HOPA required cancellations generally accelerating in a lower interest rate environment relative to a higher interest rate environment.

Mortgage interest rates tend to follow the 10-year Treasury yield, which rises and falls based on expectations for the benchmark rate set by the Federal Reserve.

Mortgage interest rates tend to follow the 10-year Treasury yield, which rises and falls based on several factors, including but not limited to expectations for the benchmark rate set by the Federal Reserve, inflation trends, economic conditions and investor sentiment.

In the years leading up to 2022, mortgage interest rates had been at historical lows, primarily as a result of monetary policy by the Federal Reserve which kept the federal funds rate at historical lows.

Starting in 2022, in an attempt to curb rising inflation, the Federal Reserve repeatedly and rapidly increased the federal funds rate which, in

July 2023, hit its highest levels in 22 years, and led to rising interest rates and mortgage interest rates in 2022 and 2023.

As a result of the higher mortgage interest rates in 2022 and 2023, we observed lower refinancing activities in the mortgage market compared to what we had observed in recent years prior to 2022, and therefore decreased turnover in our IIF.

However, if in the future inflation lowers and the Federal Reserve subsequently loosens its monetary policy, mortgage interest rates would likely decline.

As in the years leading up to 2022, if we experience a lower interest rate environment in the future, we expect that to drive higher levels of refinancing in the mortgage market, including with respect to loans we insure which may have interest rates ( i.e.

, such as those written in 2022 and 2023 in a higher interest rate environment) that are higher than the future prevailing rates.

Starting in 2022, in an attempt to curb rising inflation, the Federal Reserve repeatedly and rapidly increased the federal funds rate which, in July 2023, hit its highest levels in 22 years, and led to rising interest rates and mortgage interest rates in 2022 and 2023.

As a result of the higher mortgage interest rates in 2022 and 2023, we observed lower refinancing activities in the mortgage market compared to what we had

observed in recent years prior to 2022, and therefore decreased turnover in our IIF.

Despite the Federal Reserve lowering interest rates in 2024, the 10-year Treasury yield and 30-year fixed rate mortgage interest rates remained elevated.

However, if mortgage interest rates decline in the future, we expect any such decline to drive higher levels of refinancing in the mortgage market, including with respect to loans we insure which may have interest rates that are higher than the future prevailing rates.

A lower interest environment could subsequently lead to an increased turnover in our IIF, which could negatively impact our future revenues.

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Changes in inflation, interest rates and mortgage interest rates may have an adverse impact on our business, future revenue and financial condition.

Since 2021, inflation has increased dramatically.

Rising inflation may negatively impact our expense base by increasing the costs (including for services) we have to pay contractors, employees, service providers and vendors.

Periods of rising inflation may negatively impact our expense base by increasing the costs (including for services) we have to pay contractors, employees, service providers and vendors.

Higher inflation also puts a strain on consumer spending.

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Inflation's adverse impact on housing and mortgage affordability may therefore lower overall housing demand, result in lower NIW volume and negatively impact our business, future revenue and financial condition.

In an attempt to curb rising inflation, the Federal Reserve repeatedly and rapidly increased the federal funds rate in 2022 and 2023 which led to rising interest rates and mortgage interest rates, before announcing a pause in September 2023.

To curb rising inflation, the Federal Reserve increased the federal funds rate in 2022 and 2023, which elevated interest rates and mortgage interest rates, before announcing a pause in September 2023.

Despite the Federal Reserve lowering interest rates in 2024, the 10-year Treasury yield and 30-year fixed rate mortgage interest rates remained elevated.

Higher interest rates and mortgage rates may have an adverse impact on the refinancing origination market and purchase origination market.

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Falling home prices may also result in an increase in our default losses as borrowers' equity in their homes declines and thus decreases our future revenues and returns.

In addition, if the Federal Reserve decides to resume its interest rate hikes in the future, there can be no guarantee it will raise rates at a gradual pace, nor can there be any assurance that markets will not adversely react to rate increases and that the rate hikes would not trigger an economic downturn.

There can be no guarantee or assurance that markets will not adversely react to future interest rate decisions at the Federal Reserve or that such interest rate decisions will not trigger an economic downturn.

Downturns in the domestic economy may result in more homeowners defaulting and our losses increasing, with a corresponding decrease in our returns.

Therefore, the ultimate impact that higher inflation rates will have on the mortgage origination and mortgage insurance markets, and our loan delinquencies, is unknown, and changes in inflation, interest rates and mortgage interest rates may have an adverse impact on our business, future revenue and financial condition.

Therefore, the ultimate impact that higher inflation rates and the Federal Reserve's reaction thereto will have on the mortgage origination and mortgage insurance markets, and our loan delinquencies, is unknown, and changes in inflation, interest rates and mortgage interest rates may have an adverse impact on our business, future revenue and financial condition.

We outsource the underwriting of our mortgage insurance on certain loans to third-party underwriting service providers (USPs).

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Further, other than being able to terminate our contracts with these USPs, we generally do not have express loan-level monetary contractual remedies against these USPs if we are obligated to pay claims on ineligible loans that they improperly agreed to insure on our behalf.

If these USPs fail to perform their services as expected, we could experience increased claims on loans

underwritten by them, and our customer relationships could be negatively impacted, which would have an adverse impact on our business, financial condition and operating results.

If these USPs fail to perform their services as expected, we could experience increased claims on loans underwritten by them, and our customer relationships could be negatively impacted, which would have an adverse impact on our business, financial condition and operating results.

Our Master Policies contain restrictions on our ability to rescind coverage for certain material misrepresentations (including fraud) and underwriting defects, and if we were to fail to timely discover any such misrepresentations or underwriting defects, our rights of rescission would be significantly limited, and we could suffer increased losses as a result of paying claims on loans with unacceptable risk characteristics.

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The actual claims we incur as our portfolio matures are difficult to predict and depend on the specific characteristics of our current in-force book (including the credit score and DTI ratio of the borrower, the LTV ratio of the mortgage and geographic concentrations, among others), as well as the risk profile of new business we write in the future.

In addition, our claims experience is affected by macroeconomic factors such as housing prices, inflation, interest rates, mortgage rates, unemployment rates and other events, such as natural disasters or global pandemics, and any federal, state or local governmental response thereto.

In addition, our claims experience is affected by macroeconomic factors such as housing prices, inflation, interest rates, mortgage rates, unemployment rates and other events, such as natural disasters, including earthquakes, wildfires, hurricanes, floods and tornadoes or pandemics, and any federal, state or local governmental response thereto.

See Part II, Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations - Insurance Claims and Claim Expenses." Incurred losses and claims may exceed our expectations in the event of general economic weakness or decreases in housing values.

Even if our default rate remains the same, the total number of claims that we incur will increase as our portfolio continues to grow.

An increase in the number or size of claims, compared to what we anticipate, could adversely affect our operating results and financial condition.

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Among other things, our Master Policies require our insureds and their servicers to timely submit premium and IIF and default reports, use commercially reasonable efforts to limit and mitigate loss when a loan is in default, and if loss mitigation efforts are unsuccessful, to pursue foreclosure of the underlying property in accordance with required timelines and practices, which are generally set by the GSEs.

Servicers are required to comply with a multitude of legal, regulatory and GSE requirements, procedures and standards for

servicing residential mortgage loans.

Servicers are required to comply with a multitude of legal, regulatory and GSE requirements, procedures and standards for servicing residential mortgage loans.

If servicers of our insured loans fail to adhere to applicable requirements, procedures and standards, our losses may unexpectedly increase.

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As a result, future losses on loans that are not currently in default may have a material impact on future results if, and when, such losses emerge.

The COVID-19 virus may continue to impact our financial results and may also continue to affect our business, liquidity and financial condition.

The COVID-19 virus has had and may continue to have negative impacts on the economy and on the financial, equity and credit markets, both globally and within the U.S.

The rise of new variants (including those with greater transmissibility and/or mortality rates), may continue to pose a global risk and affect communities across the U.S.

During the pandemic, there were a number of governmental and GSE efforts to implement programs designed to assist individuals and businesses impacted by the COVID-19 virus, among them the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

These programs provided financial assistance for businesses and individuals, and targeted regulatory relief for financial institutions.

Among other things, the CARES Act previously suspended foreclosures and evictions.

The GSEs, the primary purchasers of mortgages we insure, also adopted certain measures during the pandemic to assist borrowers impacted by COVID-19, including providing a forbearance plan to certain borrowers.

Since the COVID-related forbearance programs have since ended, there can be no assurance that borrowers will be able to remain current on their mortgages, and a significant percentage could remain in default and result in mortgage insurance claims.

The extent to which the COVID-19 virus and future variants may materially impact our future financial results, business, liquidity and/or financial condition is uncertain and cannot be predicted.

The occurrence of natural or man-made disasters or pandemics could adversely affect our business, financial condition and operating results.

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We are also exposed to various risks arising out of man-made disasters, including acts of terrorism, and military actions.

For example, a natural disaster event could lead to unexpected changes in persistency rates as policyholders and borrowers who are affected by the disaster may be unable to meet their contractual obligations, such as mortgage payments on loans we insure.

For example, a

natural disaster event could lead to unexpected changes in persistency rates as policyholders and borrowers who are affected by the disaster may be unable to meet their contractual obligations, such as mortgage payments on loans we insure.

The continued threat of terrorism may cause significant volatility in global financial markets, and a natural or man-made disaster or a pandemic could trigger an economic downturn in the areas directly or indirectly affected by the disaster.

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In addition, the value of the assets in our investment portfolio could be adversely affected if such an event affects companies' ability to pay us principal or interest on their securities.

We insure mortgages for homes in areas that have been impacted by natural disasters, including from hurricanes and wildfires.

We insure mortgages for homes in areas that have been impacted by natural disasters, including from earthquakes, wildfires, hurricanes, floods and tornadoes.

Following such natural disasters, we and other MIs typically experience an increase in defaults on insured mortgages secured by homes in the impacted areas that negatively impact our incurred losses.

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Since 2020, the FHFA has been increasingly vocal about climate and natural disasters and their impact on the GSEs and the Federal Home Loan Banks (together, the regulated entities) and the national housing market, and has designated climate change as a priority concern and instructed the GSEs to actively consider its effects in their decision making.

In January 2021, the FHFA issued a Request for Input (RFI) regarding Climate and Natural Disaster Risk Management on the regulated entities and hosted a public listening session.

The RFI asked for information on data, FHFA’s supervisory and regulatory responsibilities, financial disclosures, affordability, and fairness and equity.

In December 2021, the FHFA's current director (and then acting director) Sandra Thompson issued a statement that instructed FHFA's regulated entities to designate climate change as a priority concern and actively consider its effects in their decision making.

To that end, the FHFA announced a new Conservatorship Scorecard which would hold the GSEs accountable for ensuring resiliency to climate risks, and also enhanced its monitoring and supervision of climate change issues.

The FHFA has also established eight agency-wide internal working groups and a steering committee to assess the progress of the regulated entities in managing climate risk.

The goals of the working groups and steering committee are to better understand the impact of climate risk on the housing and mortgage markets.

To that end, the FHFA established a new Conservatorship Scorecard which would hold the GSEs accountable for ensuring resiliency to climate and disaster risks, and also enhanced its monitoring and supervision of climate change issues.

In 2024, FHFA issued two Advisory Bulletins on climate-related risk management that established a GSE risk management framework to include:

(1) governance;

(2) risk identification and assessment, controls, and monitoring processes;

(3) metrics and data;

(4) scenario analysis;

and (5) risk reporting and communication processes.

The GSEs have also updated their disaster playbooks, implemented Green Bond products, and partnered with FHFA to develop additional tools and analysis.

It is possible that efforts to manage climate risk by the FHFA, GSEs (including through GSE guideline or mortgage insurance policy changes) or others could materially impact the volume and characteristics of our NIW (including its policy terms), home prices in certain areas and defaults by borrowers in certain areas, as well as increase the costs to us of providing mortgage insurance in certain areas, and therefore may impact our business and operations.

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We use third-party reinsurance, including the ILN Transactions, QSR Transactions, and XOL Transactions, to actively manage our risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements and support the growth of our business.

There is a risk that these transactions will not continue to provide the benefits we expected when we entered into them, including as a result of our counter-parties under the QSR Transactions and XOL Transactions (which are not fully collateralized like the ILN Transactions) not performing their obligations, the GSEs or the Wisconsin OCI not continuing to give us full capital credit as anticipated for the duration of the contracts, or if one or more reinsurers under any of the QSR Transactions or XOL Transactions experiences a downgrade or other adverse business event.

There is a risk that these transactions will not continue to provide the benefits we expected when we

entered into them, including as a result of our counter-parties under the QSR Transactions and XOL Transactions (which are not fully collateralized like the ILN Transactions) not performing their obligations, the GSEs or the Wisconsin OCI not continuing to give us full capital credit as anticipated for the duration of the contracts, or if one or more reinsurers under any of the QSR Transactions or XOL Transactions experiences a downgrade or other adverse business event.

Any of these events could have negative impacts on the credit for the risk transferred under the reinsurance agreements and, in turn, on our capital needs, PMIERs position and growth potential.

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If we do not continue to receive full capital credit in connection with these transactions, we would likely need to seek other sources of capital or reductions in RIF sooner than we would have expected with full capital credit under PMIERs and state insurance laws.

sources of capital will depend on the cost, availability and terms and conditions that are acceptable to us, our regulators and the GSEs.

Future sources of capital will depend on the cost, availability and terms and conditions that are acceptable to us, our regulators and the GSEs.

We cannot be sure that we will be able to secure other sources of capital or substitute reductions in RIF in the amounts we require and on favorable terms, if at all.

Our operating results depend in large part on our ability to manage the risks related to the growth of our business and on maintaining and enhancing effective operating procedures and internal controls.

Our mortgage insurance business has been quickly growing since 2013.

Our mortgage insurance business has been growing quickly.

Our future operating results depend to a large extent on our ability to successfully manage the continued growth of our business and the demands such growth places on our operations personnel and senior management team.

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The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

If our controls are not effective or not properly implemented, we could suffer financial or other loss, disruption of our business, regulatory sanctions or damage to our reputation.

If our controls are not effective or not properly implemented, we could suffer financial or other loss, disruption of our business,

regulatory sanctions or damage to our reputation.

Losses resulting from these failures can vary significantly in size, scope and scale and may have a material adverse effect on our business, financial condition and operating results.

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Our remote and hybrid working arrangements may also increase the risk of cyber-security attacks or data security incidents.

In particular, in the current remote and hybrid working arrangements environment, our employees and vendors rely on the use of portable computers and mobile devices, which can be stolen, lost or misused, making information accessible through such devices more vulnerable to unauthorized access, including by employee malfeasance.

In particular, in the current remote and hybrid working arrangements environment, our employees and vendors rely on the use of portable computers and mobile devices, which can be

stolen, lost or misused, making information accessible through such devices more vulnerable to unauthorized access, including by employee malfeasance.

We have adopted information security procedures and controls to safeguard our systems and the information that we process, transmit and store, including multi-factor authentication and a new biometrics solution to authenticate employee login.

Despite these efforts, we may not be able to anticipate or implement effective preventive measures against all cyber threats, or detect and contain a breach in a timely manner, including because employees or contractors may not follow the controls we have implemented, the invasive techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources and methods.

Further, the sophistication, availability and use of artificial intelligence by threat actors may present an increased level of risk.

Our remote or hybrid working arrangements may exacerbate these risks.

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Our investment objectives may not be achieved.

The success of our

investment activity is affected by general economic conditions, which may adversely affect the markets for credit and interest-rate-sensitive securities, including the extent and timing of investor participation in these markets, the level and volatility of interest rates and, consequently, the value of fixed income securities.

The success of our investment activity is affected by general economic conditions, which may adversely affect the markets for credit and interest-rate-sensitive securities, including the extent and timing of investor participation in these markets, the level and volatility of interest rates and, consequently, the value of fixed income securities.

We face regulatory and litigation risks associated with offering loan review services.

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PMIERs' approval requirements could prohibit, materially modify or delay us in our intended course of action.

Further, the GSEs may modify or change their interpretation of terms they require us to include in our mortgage insurance policies for loans purchased by them, requiring us to modify our terms of coverage or operational procedures to remain an approved insurer, and such changes could have a material adverse impact on our financial

position and operating results.

For example, we and other approved insurers were required to implement new master policies to, among other things, include terms that conform to the GSEs' RRP.

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Recently, there has been increased focus on and discussion of administrative reform independent of legislative action.

The former director of FHFA leadership was more focused on preparing the GSEs to exit from conservatorship by increasing the GSEs’ overall capital levels and reducing their credit risk profile.

The former director of FHFA leadership under the first Trump administration was more focused on preparing the GSEs to exit from conservatorship by increasing the GSEs’ overall capital levels and reducing their credit risk profile.

In December 2020, the FHFA published a final rule (2020 ERCF rule) establishing a new enterprise regulatory capital framework (ERCF) for the GSEs, which included provisions governing the capital relief allowed to the GSEs for loans with private MI.

The 2020 ERCF rule established that loans with private MI, as opposed to loans without private MI, provide more favorable capital relief to the GSEs.

Additionally, while in conservatorship, each GSE has been subject to the terms of senior Preferred Stock Purchase Agreements (PSPAs) establishing Treasury's ownership of senior preferred stock and warrants in the GSEs.

The PSPAs, as amended by the Treasury Department in collaboration with the FHFA, also establish Treasury's right to consent to any GSE release from conservatorship, among other rights.

Leadership at the FHFA changes from time-to-time.

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Accordingly, it is difficult to predict whether or how the FHFA might seek to implement GSE oversight beyond the current administration's term.

In 2021, President Biden removed the former director of FHFA and appointed a new director to lead the FHFA.

Unlike the prior Director's focus to exit the GSEs from conservatorship, Director Thompson's actions are more focused on balancing the dual mandate of the GSEs, including safety and soundness of the housing finance system and on increasing the accessibility and affordability of mortgage credit, especially to low-and-moderate income borrowers and underserved communities.

Between Director Thompson and the Treasury Department, they possess significant capacity to effect administrative GSE reforms.

In September 2021, the FHFA under Director Thompson, together with the Treasury Department, proposed amendments to the 2020 ERCF rule.

On March 16, 2022, the FHFA adopted the final rule (effective May 16, 2022) (2022 ERCF amendment) that amended the ERCF by refining the prescribed leverage buffer amount and the CRT securitization framework for the GSEs, which reduced the amount of capital the GSEs are required to hold, including by increasing the capital credit the GSEs receive for the credit risk that they distribute.

While the 2022 ERCF amendment made positive modifications to the ERCF, the total capital required to be held by the GSEs upon implementation of the final rule remains significant.

An increase in the capital required to be held by us under PMIERs could make our products more expensive and could have a material adverse impact on our financial condition and future business prospects.

Between the Director of the FHFA and the Treasury Department, they possess significant capacity to effect administrative GSE reforms.

Subsequent to the adoption of the 2020 ERCF rule and the PSPAs, the Director of the FHFA, together with the Treasury Department, have adopted amendments to both the 2020 ERCF and the PSPAs to help facilitate the ultimate release of the GSEs from conservatorship and additional changes could be adopted.

Further changes to the ERCF, the PSPAs, or the business practices of the GSEs, including any that increase the capital required to be held by us under PMIERs, could make our products less desirable or more expensive and could have a material adverse impact on our financial condition and future business prospects.

Other potential GSE reforms, whether through legislation or administrative action, could impact the current role of private mortgage insurance as credit enhancement, including its reduction or elimination, which would have an adverse effect on our revenue, operating results, prospects or financial condition.

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In recent years, the FHFA has set goals for the GSEs to transfer significant portions of the GSEs' mortgage credit risk to the private sector.

Several credit risk transfer products had been created to transfer mortgage credit risk to the private sector, including the now suspended IMAGIN and EPMI and others discussed above in " Our NIW volumes could be adversely affected if lenders and investors select alternatives to private MI.

" To the extent these and any other current or potential credit risk products that may evolve in a manner that displace primary MI coverage, the amount of insurance we write may be reduced.

To the extent any other current or potential credit risk products that may evolve in a manner that displace primary MI coverage, the amount of insurance we write may be reduced.

It is difficult to predict the impact of any other current or potential alternative credit risk transfer products, if any, that are developed to meet the goals established by the FHFA.

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As a result, the members of the MI industry, including NMIC, face litigation risk, including the risk of class action lawsuits, and administrative enforcement by federal regulators and state insurance agencies in the ordinary course of operations.

In addition, the

private MI industry, including NMIC, may be affected by changes in the laws and regulations to which we are subject or the way they are interpreted or applied.

In addition, the private MI industry, including NMIC, may be affected by changes in the laws and regulations to which we are subject or the way they are interpreted or applied.

See " Item 1 - Business - U.S.

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To date, we have not recognized a material liability related to any of our legal proceedings.

However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of any such matters in the future could have an unanticipated material adverse effect on our liquidity, financial position and operating results.

However, the outcome of litigation and other legal

and regulatory matters is inherently uncertain, and it is possible that one or more of any such matters in the future could have an unanticipated material adverse effect on our liquidity, financial position and operating results.

Our business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's ATR Rules defining a QM negatively impact the size of the origination market.

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These large banks may also retreat from high LTV lending if the proposal, as drafted, is passed.

However, we do not have clarity on when we can expect the final proposal or how much time will be provided for banking organizations to implement the final rule once it has been issued.

However, as of July 10, 2024, the Chairman of the Federal Reserve, as a member of the Basel Committee, made public remarks in favor of issuing a new proposed rule.

The comment period for the proposal, originally scheduled to end on November 30, 2023, was extended to January 16, 2024.

The full Basel Committee has yet to finalize next steps on a future path forward.

Accordingly, we do not have clarity on when we can expect the final proposal or how much time will be provided for banking organizations to implement the final rule once it has been issued.

Further, it is possible (but not mandated by Basel IV) that the U.S.

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NMIC has the capacity to pay aggregate ordinary dividends of $98.4 million to NMIH during the twelve-month period ending December 31, 2024, without prior approval from the Wisconsin OCI.

NMIH also has access to $250 million of undrawn revolving credit capacity under the senior secured credit facilities.

NMIH also has access to $250 million of undrawn revolving credit capacity under the senior unsecured credit facilities.

In addition, NMIH currently receives cash from our insurance subsidiaries, consisting of payments made under our tax and expense-sharing arrangements.

Among such agreements, the Wisconsin OCI has approved the allocation of interest expense on our $400 million aggregate principal amount of senior secured notes that mature on June 1, 2025 (the Notes) and senior secured credit facilities to NMIC to the extent proceeds from the Notes offering and facility are distributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.

Among such agreements, the Wisconsin OCI has approved the allocation of interest expense on our $425 million aggregate principal amount of senior unsecured notes that mature on August 15, 2029 (the 2024 Notes) and senior unsecured credit facilities to NMIC to the extent proceeds from the 2024 Notes offering and facility are distributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.

The expense-sharing arrangements between us and our subsidiaries, as amended, have been approved by the Wisconsin OCI, but such approval may be revoked at any time.

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Other states in which our insurance subsidiaries are licensed also limit or restrict their ability to pay dividends.

It is possible that Wisconsin and other states that have dividend restrictions will adopt revised statutory provisions or

interpretations of existing statutory provisions that could be more restrictive than those currently in effect or will otherwise take actions that may further restrict the ability of our insurance subsidiaries to pay dividends or make distributions or returns of capital.

It is possible that Wisconsin and other states that have dividend restrictions will adopt revised statutory provisions or interpretations of existing statutory provisions that could be more restrictive than those currently in effect or will otherwise take actions that may further restrict the ability of our insurance subsidiaries to pay dividends or make distributions or returns of capital.

In addition, under the PMIERs, if an approved insurer fails to meet the PMIERs financial requirements, such approved insurer may not pay dividends without the prior written approval of the GSEs.

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• placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources.

In addition, our senior secured credit facilities and the indenture governing our senior secured notes contain certain restrictive covenants that, among other things, limit our ability to incur additional indebtedness, make investments, incur liens, transfer or dispose of assets, merge with or acquire other companies and pay dividends.

Our senior secured credit facilities require us to comply with certain financial and other maintenance covenants.

A failure to comply with covenants or the other terms of our senior secured credit facilities and the indenture governing our senior secured notes could result in an event of default under such indebtedness, which, if not remedied, may trigger an event of default under certain other indebtedness.

If the lenders under our senior secured credit facilities terminate their commitments or we are unable to satisfy certain covenants or representations, we may not have access to funding in a timely manner, or at all, when we require it.

If funding is not available under the senior secured credit facilities when we require it, our ability to continue our business practices or pursue our current strategy could be limited.

If any indebtedness under the senior secured credit facilities or our senior notes is accelerated, we cannot assure you that our assets would be sufficient to repay such amounts in full, and the lenders and/or noteholders could foreclose on the collateral securing the obligations under the senior secured credit facilities and the senior notes, including, subject to regulatory approval, the stock of NMIC and Re One.

In addition, our senior unsecured credit facilities and the indenture governing our senior unsecured notes contain certain restrictive covenants that, among other things, limit our ability to incur additional indebtedness, make investments, incur liens, transfer or dispose of assets, merge with or acquire other companies and pay dividends.

Our senior unsecured credit facilities require us to comply with certain financial and other maintenance covenants.

A failure to comply with covenants or the other terms of our senior unsecured credit facilities and the indenture governing our senior unsecured notes could result in an event of default under such indebtedness, which, if not remedied, may trigger an event of default under certain other indebtedness.

If the lenders under our senior unsecured credit facilities terminate their commitments or we are unable to satisfy certain covenants or representations, we may not have access to funding in a timely manner, or at all, when we require it.

If funding is not available under the senior unsecured credit facilities when we require it, our ability to continue our business practices or pursue our current strategy could be limited.

If any indebtedness under the senior unsecured credit facilities or our senior notes is accelerated, we cannot assure you that our assets would be sufficient to repay such amounts in full, and the lenders and/or noteholders could foreclose on the collateral securing the obligations under the senior unsecured credit facilities and the senior

notes, including, subject to regulatory approval, the stock of NMIC and Re One.

Any of these actions could have a material adverse effect on our business, financial condition and operating results.

Our existing, and any future, variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.

Any indebtedness we may incur under our senior secured credit facilities and our future indebtedness may be subject to variable rates of interest, exposing us to interest rate risk.

Any indebtedness we may incur under our senior unsecured credit facilities and our future indebtedness may be subject to variable rates of interest, exposing us to interest rate risk.

If interest rates increase, our debt service obligations on such variable rate indebtedness would increase, resulting in a reduction of our net income that could be significant, even though the principal amount borrowed would remain the same.

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We may incur substantial additional debt in the future, including up to $250 million in borrowings we may choose to make under our 2024 Revolving Credit Facility.

Although the credit agreement governing our 2021 Revolving Credit Facility and the indenture governing our senior secured notes each limit our ability and the ability of certain of our subsidiaries to incur additional debt, these restrictions are subject to a number of qualifications and exceptions, and, under certain circumstances, we may incur additional debt in compliance with these restrictions.

Although the credit agreement governing our 2024 Revolving Credit Facility and the indenture governing our senior unsecured notes each limit our ability and the ability of certain of our subsidiaries to incur additional debt, these restrictions are subject to a number of qualifications and exceptions, and, under certain circumstances, we may incur additional debt in compliance with these restrictions.

In addition, our 2024 Revolving Credit Facility and indenture does not prevent us from incurring certain obligations that do not constitute "indebtedness" as defined therein.

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Such stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common stock and might dilute the book value of our common stock or result in a decrease in the per share price of our common stock.

Future issuance of debt or preferred stock, which would rank senior to our Class A common stock upon our liquidation, may adversely affect the market value of our common stock.

Future issuance of debt or preferred stock, which would rank senior to our common stock upon our liquidation, may adversely affect the market value of our common stock.

Shares of our common stock are equity interests and do not constitute indebtedness of NMIH.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors