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NMI Holdings Inc (NMIH -0.03%)
Q3Â 2020 Earnings Call
Nov 5, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by and welcome to the NMI Holdings Inc, Third Quarter 2020 Earnings Conference Call. [Operator Instructions]
I would now like to turn the call over to Mr. John Swenson. Please go ahead, sir.
John M. Swenson -- Vice President, Investor Relations and Treasury
Thank you, Leah. Good afternoon and welcome to the 2020 Third quarter conference call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman; Claudia Merkle, CEO; Adam Pollitzer, our Chief Financial Officer; and Julie Norberg our Controller. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at www.nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements.
Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC. If and to the extent the Company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we refer to certain non-GAAP measures, in today's press release and on our website we've provided a reconciliation of these measures to the most comparable measures under GAAP.
Now I'll turn the call over to Brad.
Bradley M. Shuster -- Executive Chairman of the Board
Thank you, john. And good afternoon, everyone. On today's call, we'll review our third quarter results and share an update on how code is impacting our business performance in financial position, as well as the broader housing and mortgage insurance markets. We are now eight months into this pandemic. And while public health and economic concerns persist. We continue to see broad strength and resiliency in the housing market. And we continue we see the same strength and resiliency mirrored in our performance at national EMI. We reported strong results for the third quarter, delivering a record 18.5 billion of ni W and 104.5 billion of primary insurance in force, notably our first quarter in excess of 100 billion and broadly resilient earnings that trace the success of our comprehensive credit risk management framework. We built national EMI to be a credible and sustainable Counterparty through all market cycles. From day one, we focused on building a durable franchise in a risk responsible manner. We have worked hard to establish a comprehensive credit risk management framework. And in doing so, we have built the highest quality insured portfolio in the mortgage insurance industry. Well before the pandemic emerged, we were using individual risk underwriting and rate GPS pricing to target a higher quality mix of business and had secured comprehensive reinsurance protection for enforced portfolio. alongside our credit risk management efforts, we built a strong balance sheet foundation. We have been conservative in our investment portfolio and worked hard to build a robot liquidity position.
We have flexible access to a broad range of capital and reinsurance markets. any significant regulatory funding Christian are broadly conservative stance heading into this period, and the continued success we've achieved in the capital and reinsurance markets. Most recently, with our fifth ILM closing last week, positions us to fully support our lenders and their borrowers through the duration of the covid pandemic. We're succeeding and building value every day for our employees or for our customers and for our shareholders and other key stakeholders. The new business environment is exceptionally strong with record mortgage originations driving niwa, volume, and equally constructive pricing and risk dynamics driving value alongside this credit performance in our enforced portfolio is trending in an encouraging direction. Overall, we see real strength in the housing market.
Demand is robust. house prices continue to rise and record low interest rates are giving more Americans a chance to access homeownership at a time when it's most critical.Policy efforts are also playing an important and stabilizing role. We fully endorse the various forbearance, foreclosure moratorium, and other assistance programs designed to help bridge borrowers past this point of acute stress and ensure that they are able to remain in their homes and resume their lives with limited interruption. Once the pandemic has passed. homeownership is essential, more so today than ever before. People need shelter in order to shelter in place. And allowing borrowers who through no fault of their own are facing real strain to stay in their homes and avoid foreclosure is the right social policy. It will also help speed the ultimate pace of economic recovery. We encourage policymakers to maintain their focus and offer continued support as needed to carry homeowners through this period.
With that, let me turn it over to Claudia.
Claudia J. Merkle -- Chief Executive Officer
Thank you, Brad. I continue to be pleased with the performance of our team and our business through the COVID pandemic. Our transition to a remote work environment has been seamless. Our team has connected and has found innovative ways to advance our customer engagement. Our decision to prioritize discipline and responsible wrist selection in every aspect of our business has been validated by the strong credit performance of our enforced portfolio. our balance sheet strength and funding profile have proven to be durable, with standout execution in the capital and reinsurance markets. And our operating platform has scaled effectively, easily supporting a massive increase in our new business volume. Our strategy works and this comes through in our third quarter performance. gap net income for the quarter was 38 point 2 million or 45 cents per diluted share. And adjusted net income was 40.4 million for 47 cents per diluted share. gap return on equity was 11.9% for the quarter, and adjusted RV was 12.6%. We generate a record and IWA of 18.5 billion up 41% from the second quarter, and 31% compared to the third quarter of 2019. The new business environment remains exceptionally strong COVID is driving a shift in behavior and fueling what we expect to be a sustained increase in purchase demand. People are moving out of more densely populated urban areas in favor of suburban communities, where social distancing is more easily achieved. Shelter in Place directives are reinforcing the importance of the home and driving increased interest from first time buyers. record low rates are added fuel, increasing affordability and drawing additional buyers to the market. This record demand is meaningfully outpacing supply and driving continued house price appreciation and broad resiliency in the housing market. Our volume is at record levels and the value of our new business production is equally strong.
Our record EMI W is matched by continued pricing discipline, stringent underwriting standards, and attractive risk adjusted returns on new business flow. This is a uniquely valuable new business environment. In the third quarter, we activated 25 new lenders. We are now doing business with a broadly diverse group of nearly 1200 high quality originators. Our sales team is signing up new accounts and deepening our penetration, all while operating on a fully remote basis. We see a real opportunity to help our lenders and their bars at a time when they need us most and in turn to increase our reach in the market. We built our company to perform across all cycles and everything we have done to build a durable and profitable business, recruiting and retaining great talent, establishing the right culture, engaging with customers in a consultative way. And managing risk, expenses and capital has positioned us to live Through the stress, the strength of our position coming into the pandemic has allowed us to remain fully customer focus throughout. We have been consistent with our sales message, our price delivery through rates ups, and our underwriting response times and operational readiness. We are delivering in a business as usual way and see a clear opportunity to continue doing what we do best, responsibly deploying capital to support our customers and drive value.
With that, I'll turn it over to Adam.
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
Thank you, Claudia. We delivered strong financial results in the third quarter against the backdrop of a resilient housing market and stabilizing macro environment. We generated 18 point 5 billion of ni w in the third quarter, and reported primary insurance in force of 104 point 5 billion as September 30. net premiums earned were 98 point 8 million. adjusted net income was 40 point 4 million or 47 cents per diluted share, and adjusted return on equity was 12.6%. Total ni W of 18 point 5 billion included 16 point 5 billion of monthly production. Purchase originations accounted for 69% of our volume in the quarter, up from 59% in the second quarter, consistent with the accelerating pace of purchase activity we've seen across the housing market. As Claudia mentioned, the new business environment is exceptionally strong. we're achieving record volume, strong risk adjusted returns on your production. And because of the record low note rates on our current flow, we expect this business will be the most persistent we've ever originated. Taken together. The volume value and stickiness of our new business production is driving growth in the embedded value of our insured portfolio and will serve to seed our future financial results. primary insurance in force was 104 point 5 billion compared to 98 point 9 billion at the end of the second quarter. While record low interest rates have helped spur exceptionally strong new business volume who contributed to the resiliency of the overall housing market.
They have continued to drive an elevated level of refinancing activity and portfolio turnover 12 months persistency in the primary portfolio was 60% as of September 30. We expect persistency will remain low in the near term, given the outlook for interest rates. Over time however, we expect portfolio turnover will slow and persistency will rebound as the business we're writing in the current rate environment stays on our books for an extended period. NET premiums earned in the third quarter were 98 point 8 million, including 12.6 million from the cancellation of single premium policies. reported yield for the quarter was 39 basis points, compared to 40 basis points in the second quarter, reflecting the seeded premium cost of our fourth Island completed in July. investment income with 8.3 million in the third quarter compared to 7.1 million in the second quarter. Our investment income grew in the quarter as we deployed proceeds from the equity and debt offerings we completed in June. underwriting operating expenses were 34 million compared to 30 point 4 million in the second quarter. expenses in the third quarter included 2.3 million of cost incurred in connection with our iOS offerings in July and October. We expect an additional 1.8 million of Island related costs to come through in the fourth quarter related to our October transaction. exclude excluding Ireland related costs adjusted underwriting and operating expenses were 31.7 million, compared to 30.2 million in the second quarter. Our gap expense ratio was 34.4%. Non adjusting expense ratio was 32.1% for the third quarter.
We had 13,765 defaults in our primary portfolio at September 30. While our default population increased relative to June 30, and remained elevated compared to our pre COVID experience. Our default count peaked and decline in the quarter from 14,236 at August 31 to 13,765 at September 30. Our default rate experience was similar, declining to 3.6% at September 30, from 3.76% at August 31. We're greatly encouraged by the credit performance of our portfolio with our default experience peaking at a low absolute level, particularly when considered against the magnitude of the COVID stress and very quickly beginning to improve as a rising number of COVID impacted borrowers are curing back into performing status. This trend continued in October with our default population declining to 13,108 and article Rate declining to 3.41% as of October 31. at quarter end 24,809, or six and a half percent of the loans we insured in our primary portfolio, were enrolled in a forbearance program, including 12,665 of the loans in our default population 1772 loans that had missed at least one payment, but not progressed into default status, and 10,372 or 42% of all forbearance loans that were fully performing without any missed payments. Looking forward, while a second viral wave could exacerbate current issues and contribute to additional macro dislocation, we're optimistic that we will see continued improvement in our credit performance, as impacted borrowers benefit from a rebounding economy.
The expanded set of repayment and modification options introduced by the GST is to ease the transition out of forbearance, and broad resiliency in the housing market and accelerating home price appreciation. Claims expense was 15.7 million in the third quarter, down from 34.3 million in the second quarter. We make similar assumptions and establishing our case reserves as of September 30, as we did a June 30. Balancing the beneficial impact forbearance programs and other forms of borrower assistance are expected to have our ultimate claims experience with a conservative view on house price paths and other macro economic factors. Interest expense in the quarter was 7.8 million, reflecting the full run rate cost of our $400 million senior notes issuance in June. We recorded a $437,000 loss from the change in the fair value of our warrant liability during the period. gap net income for the quarter was 38 point 2 million or 45 cents per diluted share. adjusted net income which excludes periodic transaction costs, warrants fair value changes and net realized investment gains and losses was 40.4 million or 47 cents per diluted share. The island that we closed on October 29. Our fifth boundary offering built upon the success we've achieved in the risk transfer markets today and extends our comprehensive reinsurance coverage across our most recent production. The $242 million deal carries an estimated 4.7% weighted average lifetime pre tax costs. And it's similar in structure to our first four transactions, providing us with real working layer risk protection and capital benefit. The transaction further insulates our balance sheet and femurs position against the impact of future forbearance activity and default experience. Our latest deal is particularly notable in this regard. It covers off for cumulative claims experience on risk originated primarily between April 1 and September 30 of this year, from a 2% attachment point up to a six and a quarter percent maximum detachment Full it's the amount of risk we retain before the reinsurance attaches. And we benefit IO coverage.
Our 2% deductible is markedly lower than that of all other comparable deals completed since the covid outbreak, which has averaged at 3.1 particularly lower than that of all other comparable deals completed since the COVID outbreak, which an average of 3.1% attachment point is actually lower than nearly all comparable pre COVID transactions as well. Achieving a materially lower deductible means that we will realize a reinsurance benefit at a far lower loss level, and our balance sheet will benefit from loss protection at a far earlier stage. This provides us with a direct benefit in the event the performance of the housing market shifts through the course of the COVID recovery. A lower deductible also provides us with increased seniors efficiency by allowing us to release more of the equity capital that we have previously allocated to support this pool and redeploy it in support of incremental high quality high return new business production. Our ability to successfully execute another regular way IO n offering to achieve such a favorable outcome in terms and price. Robbie demonstrates the durability of the island market as a source of support for mortgage insurance risk, and highlights the confidence that investors have in our individual risk underwriting approach and consistent use of rwgps to target higher quality volume. total cash and investments were 1.9 billion at quarter end, including 75 million of cash and investments at the holding company. shareholders equity at the end of the third quarter was 1.3 billion equal to $15 42 cents per share. We have 400 million of outstanding senior notes and upsized our revolving credit facility to 110 million following the close of the quarter. Our revolver remains undrawn and fully available. quarter round, we reported total available assets on the premieres of 1.7 billion and risk base required assets of 991 million. Excess available assets were 681 million.
The island issuance that we closed last week is not included in these figures. As as it was completed after quarter ends. The $242 million offering will further bolster our access position, and provide even more funding runway for future periods. Overall, we delivered strong results for the quarter with a record volume and value of new business production and encouraging credit performance in our enforce portfolio driving resiliency in our earnings. We continue to differentiate with our success in the island market. And the strength of our current funding profile and comprehensive and uniquely expansive nature of our reinsurance program provide us with significant team years and state regulatory capital runway.
With that, I'll turn it back to Cloudia.
Claudia J. Merkle -- Chief Executive Officer
Thanks, Adam. So that has brought into sharp focus the important role that national EMI and the broader private mortgage insurance industry play in supporting a healthy and functioning housing finance system that worked for bars, lenders, and taxpayers across all market cycles. We came into the pandemic in a position of strength bolstered by the conservatism with which we have managed our business. And we have continued to provide support and build value through this period. As we navigate through COVID, we will continue to leverage our proven strategy to expand our customer engagement and market presence while writing record new business and growing in a risk responsible manner.
Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from Mark DeVries from Barclays. Your line is open.
Mark DeVries -- Barclays -- Analyst
Thank you could discuss how the rates of your newer default to be the ones that some borrowers who have opted into forbearance have compared to your expectations. And you know, what would you need to see to potentially reassess that 7% claims rate assumption we made?
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
Sure it's a market, it's obviously still early. But the the roll race, and that the transition rates that we saw during the quarter, were consistent with our expectations. When we established reserves on the earliest COVID defaults in in the second quarter. And there's nothing significant change that came through in the third quarter that caused us to think a reset was necessary. We apply that same 7% claim rate to the new COVID related defaults that came in in the third quarter as we had in the second quarter. Going forward, we'll monitor macro data, particularly around house price appreciation to assess whether or not we need to make adjustments to to that claim rate. One item I would note is I mentioned in the prepared remarks that we made a similar set of assumptions in establishing our case reserves. It wasn't just the roll rate, but it was the underlying macro factors that went into the development of that roll rate. We continue to assume that house prices will be down modestly over the next few years. We think it's an appropriate Lee conservative stance. But as more data comes in, that reinforces the view around the resiliency of the housing market, in particular, the accelerating path of home price appreciation, those will be items that we monitor going forward.
Mark DeVries -- Barclays -- Analyst
Okay, that's helpful. And then the expense ratio was down bus. Yeah, even after adjusting for the capital markets, transaction costs, was there anything else in expenses worth calling out that whether the operating wherever is this just a product is of having to turn your book or with Wi Fi? elevated? It's gonna live it on putting the levers and volume?
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
Yeah, in the quarter, I would say the increase that we saw in our overall expenses, which way to hit on sort of the development of the operating leverage unfolded. Part of it was related to just the growth in our portfolio and some of the variable costs albeit not significant, but there are variable costs associated with new business production. We also had a modest benefit in the second quarter that didn't continue to come through in the third quarter related to the start of our IP partnership with TCS. We signed the contract On March 31, with him, but expenses ramped through the quarter alongside the ramp of that engagement, and our q3 expenses reflected a full quarters worth of that, of that relationship. In terms of our operating leverage going forward, we fully expect that we will continue to see strong growth in our in short portfolio that over time that will drive strong growth in our premium revenue that far outpaces the necessary investments that we need to make or the growth in our operating expenses, and then operating leverage will continue to carry forward.
Mark DeVries -- Barclays -- Analyst
Great, thank you.
Operator
Your next question comes from Rich Shades of Jason Rogers. Your line is open.
Rich Shades -- Jason Rogers -- Analyst
Hey, everybody, thanks for taking my questions this afternoon. I'm curious, Adam, one of the things that you highlighted in your comments, was the demand for housing driven by the urban Exodus. I'm curious if you are seeing any distortions in terms of either home prices or default rates related to urban environments versus sub suburban or far suburb environments?
John M. Swenson -- Vice President, Investor Relations and Treasury
Yes, you know, we did highlight that. And it is certainly something that's driving an increased amount of purchase activity, I would say much more what we're seeing really driving the skyrocketing demand is, I'll call it the emotional drive toward homeownership that in this environment, the house has everything, Brad used the phrase that in order to shelter in place, you need shelter. And that's something we've come to talk about internally, that's really driving that emotional need right now the house is it's where you work. It's where your kids go to school. It's where you go on dates with your significant other. And it's that emotional aspect. And layered on top of that augmenting it a bit is that shift from urban to suburban. In terms of performance geographically, we're seeing pretty much across the board encouraging trends from a credit performance standpoint, even in those markets that we would identify as being the most exposed to the industries that are hardest hit by COVID. Las Vegas in sort of the greater Henderson Henderson area, for example, in Nevada, that is perhaps the most exposed to Travel and Leisure gaming and entertainment, house prices are up seven and a half percent on an annualized basis, since the start of the COVID crisis. And remember, house prices really drive such a significant amount of credit performance. We're not seeing outside of perhaps small pockets of central business districts and some larger cities that are dealing with their own idiosyncratic issues like New York, maybe parts of Chicago or LA, we're really seeing broad based national strength from a house price standpoint, from a demand standpoint, and by essentially from a credit standpoint.
Rich Shades -- Jason Rogers -- Analyst
Got it? Okay, that's helpful, you know, because, again, anecdotally, one of the things that we're hearing is that that urban Exodus is more family driven. So you're seeing the divergence, for example, in terms of home price appreciation or depreciation in urban environments for smaller places versus larger places is families leave the cities, but young professionals don't. Are you seeing that in the portfolio at all?
John M. Swenson -- Vice President, Investor Relations and Treasury
Yeah, you know, I think, anecdotally, we're seeing that as well. But it's not, I would say we're not we're not looking at right individual house price development for each of the each of the homes that we're insuring, and so could give you a perfect window into what's trending there.
Rich Shades -- Jason Rogers -- Analyst
Okay, great. Thank you guys very much.
Operator
And your next question comes from Sam Cole from Credit Suisse. Your line is open.
Sam Cole -- Credit Suisse -- Analyst
Hi, guys. I'm on for Doug today. Adam, did you provide an update on what the single premium calculation that was on the yield?
John M. Swenson -- Vice President, Investor Relations and Treasury
Sure. bear with a second, can we have this point up for you? So in the quarter, we had 12 point 6 million of cancellation revenue that compares to 15 and a half million of cancellation contribution in the second quarter, from a yield standpoint, was about five basis points of yield to Steve's point of comparison, in the second quarter, that 15 and a half million of cancellation revenue was about 6.3 basis points of the yield component.
Sam Cole -- Credit Suisse -- Analyst
Got it. Okay. Since we're on the topic of yield, I guess, we have the fifth island that you guys did that coming in. So like, how should we think about fourth quarter? I know there's a lot of moving pieces to this but just your thoughts there.
John M. Swenson -- Vice President, Investor Relations and Treasury
Yeah, I think you hit the nail on the head, there are a lot of moving pieces, it's it's going to depend on where cancellation revenue comes in, it's going to depend on what happens from a persistency standpoint, and a volume standpoint, but looking at it now, you know, not to give you anything explicit the perhaps as a steer, we do expect, for us a modest decline in yield in the fourth quarter to reflect the addition of that si lm 300. The impact, I would say, you know, in the quarter, our fourth ln was it had it hit yield by about 1.2 basis points. Our fifth violin was smaller, it was 242 million in size versus 322 million in size for the fourth violin. And it was also more efficient from a pricing standpoint, we were able to achieve meaningfully better terms on that transaction. So you know, look at, look at that as a point of reference as well.
Sam Cole -- Credit Suisse -- Analyst
So it should be slightly, like, maybe slightly less than one basis point. I guess. That's a good.
John M. Swenson -- Vice President, Investor Relations and Treasury
I don't like this.
Sam Cole -- Credit Suisse -- Analyst
Yeah. Thank you
Operator
Your next question comes from Tommy McJoynt from KBW. The line is open.
Tommy McJoynt -- KBW -- Analyst
Hey, guys, good evening. Thanks for taking my question. There's been some chatter today about the increased competition in the bullpen market. So so first off for us, just give us kind of what your level of participation is in that channel. And then just your broad views and the competitive landscape there.
Claudia J. Merkle -- Chief Executive Officer
Sure, sure. Hi there. So I can't speculate on the bulk bid, we don't participate in that. Our primary focus is risk based pricing. And COVID has really confirmed that strategy, where we can quickly come to market uncertainties, but that's in certain geographies or more broadly, as far as pricing overall, the pricing environment remains constructive. prices up, risk is down. capital required to support new businesses down so unit economics are up. We were early to raise rates, it's always been our posture to be more conservative, and especially in the in the face of an unprecedent stress event. But everyone else eventually followed suit.
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
One other reference point of view, we don't touch that market. It's not what we participate right now. And we are laser focused on re TPS. To give you a sense, our pricing is still really constructive and resilient. In October, you know, we're now early November, in October, the pricing on our new business applications was up 10% compared to the first week of March. And that's exactly the same stat that I referenced when we had our second quarter call about our July and our June production. And Important to note that's up 10%. Even after adjusting for it's not like for life from a risk standpoint, it's just off 10%. Side by side, it's even more on a risk adjusted basis.
Tommy McJoynt -- KBW -- Analyst
Okay, and has the song and dial and market it's had an impact on pricing.
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
We obviously only control our pricing. As Claudia mentioned, we haven't really seen broad moves from a pricing standpoint out in the market. In large part because we're not participating actively on on the bulk side or with those negotiated bids. We've always been of the opinion that our ability to get favorable outcomes in the secondary market, either the island market or the quarter share market is in part predicated on us being responsible actors in the primary market. And that's not just from a risk standpoint, it's also from a pricing standpoint, we haven't noticed anything, I'll call it creeping from the island market into into the primary market.
Tommy McJoynt -- KBW -- Analyst
At the same time, and just just last one, I'm thinking about how quickly some of the recent vintages meaning the post the price increases that were implemented in March, are becoming such a large part of the total enforced book. Is it reasonable to think that the core in forcefield could stabilize fairly soon, perhaps within the next year or so seeming as price changes?
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
You know, we don't give a look forward. But certainly we're getting a benefit now around sort of the quantum of business coming on, and the pricing at which we're bringing that business on. There are still large chunks of our portfolio, though that have, you know, some real premium rich business that was originated prior to tax reform and pricing changes that came into the industry in the mid middle of 2018. that are, you know, I would say that are still ripe for refinancing. So, if all else was equal, and we were simply bringing on that new business, it might have a stabilizing effect we need to see what happens from a refi cycle and a runoff standpoint.
Tommy McJoynt -- KBW -- Analyst
Okay, thank you.
Operator
And your next question comes from Jack Micenko from SIG. Your line is open.
Jack Micenko -- SIG -- Analyst
Good afternoon, everybody. A couple of questions for you. Mr. Kalika, was there a little quickly. forbearance freedom of total inventory, forbearance rate on the new EQs, this quarter if you have this number?
John M. Swenson -- Vice President, Investor Relations and Treasury
Sure, I don't have that forbearance rate on the new defaults in the quarter, but I can give you a directional steer. at quarter end, we had 24,809 loans that we insured that were enrolled in a forbearance program, that's a six and a half percent forbearance rate. That number is down, I think we had about 28,500 doing this from memory, right about there at the end of June, I don't remember what that was, is a rate of 7677 as a rate. So we're seeing a decline that's generally consistent with sort of the quantum of movement that's being reported about the GFC data. of the new defaults that came through in the quarter. I don't have that rate. But there are 13,765 defaults that we had at September 30 12,665. of those were in a forbearance program, I would say, nearly all of the COVID related defaults, those that emerged following really March, were nearly all of them are in a forbearance program, the bulk of those that are not in a forbearance program relates to our pre called the default population.
Jack Micenko -- SIG -- Analyst
Got it. Yeah, that was my next question. And then, you know, we've had a few of your fears before today, as well. And the refi mix of production has come down sequentially. Is it? Is it too soon to claim victory as it relates to persistency going forward? Or as a move from, say, 40 to 30%? Not enough for you to signal, hey, persistence is gonna bounce off these low points here a little sooner than expected.
John M. Swenson -- Vice President, Investor Relations and Treasury
Yeah, I wouldn't. I wouldn't declare victory per se, I think what we're seeing in terms of the mix shift, it's more reflection of the strength and the accelerating path that purchase demand is taking and that we're seeing in purchase origination volume as opposed to something notable happening in terms of slowdown or refinancing volume. There is obviously a date out there that we need to monitor, which is December 1, when the currently proposed GFC adverse market Wi Fi adder 50 basis points would go into effect. We obviously were monitoring that it's too early to know what if that's going to ultimately be imposed at that point extended as it had been originally, and what effect that will have, you know, with with mortgage rates, you know, in the 3% zone, even for refinancing right now, there's still a lot of business, that that's ripe for refinancing.
Jack Micenko -- SIG -- Analyst
Okay, thank you.
Operator
[Operator Instructions] The next question comes from Geoffrey Dunn from Dowling & Partners. Your line is open.
Geoffrey Dunn -- Dowling & Partners -- Analyst
Thank you very much. Couple of number questions first, Adam, I missed the kashipur holdco. Could you repeat that for us?
John M. Swenson -- Vice President, Investor Relations and Treasury
Sure. It's 75 million.
Geoffrey Dunn -- Dowling & Partners -- Analyst
And was there any federal ibnr development in the current year provision this quarter?
John M. Swenson -- Vice President, Investor Relations and Treasury
There was Jeff. So in the quarter, we had doubled our ibnr factor in the second quarter to reflect the fact that when servicers were candidly drinking from a firehose and dealing with the emergence of COVID, and a massive influx of new reporting needs, from both a forbearance standpoint, and just a larger number of defaulted borrowers, we were accounting for some degree of some amount of service or lag. we normalize that ibnr factor now that we are far enough into this, and I'll call it the quantum of new defaults and new information that services are having to deal with, has has diminished, we're finding that the lag dynamic really isn't there in size. So we normalized, the ibnr factor.
Geoffrey Dunn -- Dowling & Partners -- Analyst
Are you able to quantify that? I don't remember what it was last quarter.
John M. Swenson -- Vice President, Investor Relations and Treasury
I don't have it at my fingertips. I don't know my fingertips, but we can give it to offline.
Geoffrey Dunn -- Dowling & Partners -- Analyst
Okay. And then last, a more of a strategic question. The company has remained underweight 9597 for quite some time. What does it take for that market to become attractive to you. Obviously, it's reflected in your delinquency rate. It's reflected in your premium rate, and probably even your IOM deals. Is it the surcharges on that business? Is it the risk adjusted return that competitive pricing levels or just desire not to really be heavily in that marketplace?
Claudia J. Merkle -- Chief Executive Officer
Start with that, just from a from a overall basis. You know, we we don't think we're being too conservative at this point at all. But we look at it that this is still a period of unknowns, we've never seen anything of this nature of magnitude. So the our focuses right now is not the time to lean in and grow our concentration on 97, below 680 or greater than 45 GTI. This is the time for us to fully utilize and fully flex, if you will, the underwriting pricing tools that we've worked so hard to develop. So that's our overall thoughts are on the 97th. that the conservative approach?
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
Yeah, it was just the other. The other piece that we're finding, as purchase volume picks up, like 97 are not a refi product. They're just not, but by the time somebody is refinancing, they've especially in this environment with accelerating HDA. They've benefited from equity built in their homes, and they're getting effectively a mark on their house for purposes of the new the new downpayment consideration and the new LTV, our 97 LTV volume due to increase in you know, in October that we just reported, I think we reported 7.7% versus 4.6% in September and 2.3%. In August. What's happening there is our purchase volume is increasing. The other piece, though that we are monitoring is it certainly appears that this stress events is an earnings event for borrowers and not an equity event for their ownership positions in their homes. And so while we're very comfortable and safe, we have the appropriate mix right now. When we think about that, if we were to look at what are the different risk buckets, right, are we looking at LTV, high LTV, low FIFO, high DPI of those higher LTV is the one that we do expect to perform best through this stress environment. And as long as that volume can come on with no layered risk, right? No high LTV borrower with weak FIFO characteristics or dti characteristics. That is business that we are comfortable writing and we're taking the share of that business that we think is appropriate. And that's reflected in candidly in the increase that we saw in October.
Geoffrey Dunn -- Dowling & Partners -- Analyst
Okay, thanks for your comments.
Operator
[Operator Instructions] The next question comes from Mark Hughes from Truist Securities. Your line is open.
Mark Hughes -- Truist Securities -- Analyst
Thank you. Good afternoon. I'm not I'm sorry if I missed this. But did you provide the incremental default in the October was that the disclose?
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
We I gave the not the incremental it's actually a decrease. So as of October 31, our default population was 13,108. And our default rate was 3.41%.
Mark Hughes -- Truist Securities -- Analyst
And then, any observations about the new default are just as in the in the month.
John M. Swenson -- Vice President, Investor Relations and Treasury
No, you know, I would say more broadly, not necessarily just about the month, we have a public we've got a window into what the waiting room looks like the number of borrowers who have missed payments, but haven't progressed, you know, within enough time is not allowed for them to be included in the default population. And that group that's sitting in the waiting room has been considerably over the last several months. And that's a favorable, another favorable indicator about where credit performances is going. Again, heavy caveat to things to change. Obviously, the course of this virus is it's such an unknown, but the data that we have now is really quite encouraging.
Mark Hughes -- Truist Securities -- Analyst
And then I'm sorry, could you address this earlier as well. But the some of the numbers about home price increases lately have been pretty strong, how much credibility to give to that when you're looking at the risk of actual claims and the actual losses. We've got the as you point out an unusual dynamic. With the tight housing market prices are up. But how how durable is that going to be and how does it influence your thoughts about potential losses?
John M. Swenson -- Vice President, Investor Relations and Treasury
Yeah. So I would say that historically speaking, house price path, house prices have been the single most important driver of residential mortgage credit performance. If you build as we do a variety of econometric models, it's very difficult to call a great credit performance. If house prices are strong, and there are historical periods where we can see that if we look even just at the poster dot com recession from 2000 to 2003. That's a period where unemployment spiked significantly over 60% from April of 2000 to June of 2003. And notwithstanding that spike in unemployment, house prices continue to rise steadily about 30%. If you look at Case Shiller, over that same time period of low and behold, residential mortgage credit performed better every single month through that stress period, notwithstanding the steady March higher in unemployment, so house prices matter, perhaps most of all, those macro factors.
In terms of our outlook, that say, we think we've taken an appropriately conservative posture to what we consider from a house price standpoint for both reserving and pricing purposes, right future credit performance and expectations factors for pricing decisions, and future expectation of credit performance in house prices factors into our reserving process. For both of those we've taken, I would say, a far more conservative view around what the future holds, then the data that's actually coming out right now. And we're very comfortable and think it's appropriate to have that more cautious posture. Given that we're still early in sort of how COVID is unfolding.
Mark Hughes -- Truist Securities -- Analyst
Thank you.
Operator
I'm showing no further question at this time, I would know why to chair the conference back to the management.
Claudia J. Merkle -- Chief Executive Officer
Thank you. Thank you again for joining us. We will be hosting our annual investor day on November 19, virtually this year, so we hope you can join us and that all of you are staying safe and healthy. Thank you again.
Operator
[Operator Closing Remarks]
Duration: 40 minutes
Call participants:
John M. Swenson -- Vice President, Investor Relations and Treasury
Bradley M. Shuster -- Executive Chairman of the Board
Claudia J. Merkle -- Chief Executive Officer
Adam Pollitzer -- Executive Vice President, Chief Financial Officer
Mark DeVries -- Barclays -- Analyst
Rich Shades -- Jason Rogers -- Analyst
Sam Cole -- Credit Suisse -- Analyst
Tommy McJoynt -- KBW -- Analyst
Jack Micenko -- SIG -- Analyst
Geoffrey Dunn -- Dowling & Partners -- Analyst
Mark Hughes -- Truist Securities -- Analyst
