Item 1.01 Entry into a Material Definitive Agreement OnMay 6, 2020 ,NMI Holdings, Inc. (the "Company" or "NMIH") and its wholly-owned subsidiaryNMI Services, Inc. (the "Guarantor") entered into that certain Amendment No. 1 (the "Amendment"), among the Company, the Guarantor,JPMorgan Chase Bank, N.A ., as administrative agent (the "Agent") and the Lenders (as defined in the Credit Agreement), to the Company's existing Credit Agreement, dated as ofMay 24, 2018 (as amended, modified and supplemented from time to time prior to the date hereof, the "Credit Agreement") among the Company, the Agent and the lender parties thereto. The effectiveness of the Amendment is subject to certain conditions, including, among other things, the repayment in full of the Term Loans (as defined in the Credit Agreement). Upon becoming effective, the Amendment will, among other things, amend the Credit Agreement to permit the Company's incurrence of up to$400 million in aggregate principal amount of secured Indebtedness (as defined in the Credit Agreement) in the form of one or more series of senior secured notes or loans to be secured by the same collateral (on a pari passu basis) that secures the Obligations (as defined in the Credit Agreement). The foregoing summary of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference. Item 2.02 Results of Operations and Financial Condition OnMay 6, 2020 , the Company issued a press release announcing its financial results for the quarter endedMarch 31, 2020 . A copy of the press release is furnished as Exhibit 99.1 to this report. The information set forth in Item 7.01 of this Current Report is incorporated by reference into this Item 2.02. The information included in, or furnished with, this Item 2.02, including Exhibit 99.1, has been "furnished" and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing or other document under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document. Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant The information in Item 1.01 above is incorporated by reference into this Item 2.03. Item 7.01 Regulation FD OnMay 6, 2020 , the Company provided an update related to the current business environment as impacted by the novel coronavirus ("COVID-19"), which will also be included in our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 . COVID-19 Developments OnJanuary 30, 2020 , theWorld Health Organization ("WHO") declared the outbreak of COVID-19 a global health emergency and characterized the outbreak as a global pandemic onMarch 11, 2020 . In an effort to stem contagion and control the COVID-19 pandemic, the population at large has severely curtailed day-to-day activity and local, state and federal regulators have imposed a broad set of restrictions on personal and business conduct nationwide. The COVID-19 pandemic, along with the widespread public and regulatory response, has caused a dramatic slowdown inU.S. and global economic activity. In the weeks following the outbreak, non-essential businesses across theU.S. have been shuttered and capital markets have experienced a significant spike in volatility and sell-off in valuations. A record number of Americans have been furloughed or laid-off, and unemployment claims have increased dramatically. The global dislocation caused by COVID-19 is unprecedented and, while there is broad hope for a medical advance that relieves the crisis and provides for a quick return to normalized activity, it is not known how long the dislocation will persist. In response to the COVID-19 outbreak and continuing uncertainties, we activated our business continuity program to ensure our employees were safe and able to continue serving our customers and their borrowers without interruption. We have also sought to broadly assess the potential impact the COVID-19 outbreak will have on theU.S. economy and housing market, and the implications for the mortgage insurance market, and our business performance and financial position. Potential Impact on theU.S. Housing Market and Mortgage Insurance Industry We expect the COVID-19 outbreak will have a direct effect on theU.S. housing market, with existing homeowners facing challenges related to COVID-19, and the volume and timing of future housing transactions negatively impacted as potential sellers re-evaluate or postpone planned sales (housing supply) and potential buyers reassess their ability and willingness to purchase homes (demand). The market may be further constrained as transactions between committed buyers and sellers encounter operational challenges, such as delayed title searches due to the closure of local government offices. 1 -------------------------------------------------------------------------------- As a market (like all others) where valuation is driven by supply/demand dynamics, this dislocation has the potential to impact housing prices. While it is too early for us to estimate the magnitude of any potential housing price decline (either nationally or in local markets), we have looked to the 2008 Financial Crisis as a point of comparison. In the wake of the 2008 Financial Crisis, national home price indices declined by approximately 30% from their pre-crisis peaks and remained severely dislocated for several years, causing significant stress for homeowners, lenders, mortgage insurers and the broader economy. We observe several differences in the current environment as compared to that in the period leading up to and through the 2008 Financial Crisis that we believe may lessen the relative housing price dislocation experienced in the aftermath of the COVID-19 outbreak, including: (i) the generally higher quality borrower base (as measured by weighted average FICO scores and loan-to-value ("LTV") ratios and tighter underwriting standards (with, among other items, full-documentation required to verify borrower income and asset positions) that prevail in the current market; (ii) the lower concentration of higher risk loan structures, such as negative amortizing, interest-only or short-termed option adjusted-rate mortgages being originated and outstanding in the current market; (iii) the meaningfully higher proportion of loans used for lower risk purposes, such as the purchase of a primary residence or rate-term refinancing in the current market, as opposed to cash-out refinancings, investment properties or second home purchases, which prevailed to a far greater degree in the lead up to the 2008 Financial Crisis; (iv) the availability and immediate application by politicians, regulators, lenders, loan servicers and others of a broad toolkit of resources designed to aid distressed borrowers, including forbearance, foreclosure moratoriums and other assistance programs codified under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act enacted onMarch 27, 2020 ; and (v) the broader and equally immediate application of a massive amount of fiscal and monetary stimulus by the federal government under the CARES Act and across a range of other programs designed to assist unemployed individuals and distressed businesses, as well as support the smooth functioning of various capital and risk markets. We also perceive the house price environment in the period leading up to the current COVID-crisis to be anchored by more balanced market fundamentals than that in the period leading up to the 2008 Financial Crisis. We believe the 2008 Financial Crisis was directly precipitated by irresponsible behavior in the housing market in which home prices were driven to unsustainable heights (a so called "bubble"). We see a causal link between the housing market and the 2008 Financial Crisis that we do not see in the COVID-19 outbreak, and we believe this will further lessen the relative housing price dislocation experienced going forward. Notwithstanding the relative differences we observe in the current environment as compared to the 2008 Financial Crisis, we do expect that housing prices will be impacted by the COVID-19 outbreak. We also expect the mix of purchase and refinancing mortgage originations will shift in the near-term due to the current pandemic. We anticipate that purchase mortgage origination volume will be lower in the aftermath of the COVID-19 outbreak than it otherwise would have been as buyers and sellers postpone or more broadly reassess current and future transactions, while we expect refinancing origination volume will increase significantly as declining mortgage rates create refinancing opportunities for existing borrowers. Historically,U.S. mortgage insurance industry penetration of the purchase origination market has been meaningfully higher than the refinancing origination market, as new home buyers have generally required a greater degree of down payment support, while refinancing borrowers have typically benefited from increasing equity in their existing homes. In recent periods, however, mortgage insurance industry penetration of the refinancing market has increased significantly and the composition of industry new insurance written ("NIW") volume between purchase and refinancing loans has shifted. Refinancing originations accounted for approximately 30% of total mortgage insurance industry NIW volume for the quarter-endedDecember 31, 2019 , compared to approximately 6% for the quarter-endedDecember 31, 2018 . We expect this trend to continue in the near-term as purchase origination volume slows and refinancing origination volume increases, particularly as those borrowers who capitalize on the emerging refinancing opportunity may not have significant equity in their homes (either because they are refinancing so soon after closing on a new home purchase or because of a decline in the appraised value of their property) and may need to rely on mortgage insurance support to complete their transactions. In this context, we expect to see a decline in totalU.S. mortgage insurance industry NIW volume in the near-term, with the impact of declining purchase origination volume partially offset by a dramatic increase in, and increasing mortgage insurance penetration of, refinancing origination volume. 2 -------------------------------------------------------------------------------- Potential Impact on NMI's Business Performance and Financial Position Operations We had 327 employees atMarch 31, 2020 , including 173 who typically work at our corporate headquarters inEmeryville, CA and 154 who typically work from home in locations across the country. In response to the COVID-19 outbreak, we activated our business continuity program and instituted additional work-from-home practices for our 173 Emeryville-based staff. We have transitioned our operations seamlessly and continue to positively engage with customers on a remote basis. Our IT environment, underwriting capabilities, policy servicing platform and risk architecture have continued without interruption, and our internal control environment and internal controls over financial reporting are unchanged. We have achieved this transition without incurring additional capital expenditures or operating expenses and we believe our current operating platform can continue to support our newly distributed needs for an extended period without further investment beyond that planned in the ordinary course. New Business Production We expect that the volume, composition, credit profile and pricing of our new business production will change due to the COVID-19 crisis. Our NIW has expanded significantly in past periods, driven by growth in the overall mortgage insurance market and the success we have had further developing our customer franchise. During the three-year period betweenJanuary 1, 2017 andDecember 31, 2019 , we activated 340 new lenders, growing our franchise by over 45%, and successfully deepened our engagement with many existing customers. In the same period, totalU.S. mortgage insurance NIW volume increased by 19% annually - peaking at$384 billion for the year-endedDecember 31, 2019 . Notwithstanding our recent gains and the customer success we have achieved, we expect that our new business volume will decline in the near-term along with the broader decline we anticipate in totalU.S. mortgage insurance industry NIW volume. We have broadly defined underwriting standards and loan-level eligibility criteria that are designed to limit our exposure to higher risk loans, and have used Rate GPSSM to actively shape the mix of our new business production and insured portfolio by, among other risk factors, borrower FICO score, debt-to-income ("DTI") ratio and LTV ratio. AtMarch 31, 2020 , the weighted average FICO score of our insurance-in-force was 751 and we had a 4% mix of below 680 FICO score risk. Similarly, atMarch 31, 2020 , the weighted average LTV ratio (at origination) of our insured portfolio was 91.9% and we had a 10% mix of 97% LTV risk. In the weeks since the outbreak of COVID-19, we have adopted changes to our underwriting guidelines, including changes to our loan documentation requirements, our asset reserve requirements, our employment verification process and our income continuance determinations, that we expect will further strengthen the credit risk profile of our new business production. We set our premium rates based on a broad range of individual and market variables, including property type, type of loan product, borrower credit characteristics, and lender profile. Given the significant economic dislocation caused thus far by the COVID-19 outbreak, and the uncertain duration and ultimate global impact of this crisis, we have taken action to increase the premium rates we charge on all new business production, in accordance with our filed rates and applicable rating rules. We expect the pricing changes we have instituted will increase the rate received on NIW volume in future periods and further enhance the credit mix of our new business production. Delinquency Trends and Claims Expense We had 1,449 NODs in our primary insured portfolio as ofMarch 31, 2020 , which represented a 0.38% delinquency rate against our 376,852 total policies . . . Item 9.01. Financial Statements and Exhibits (d) Exhibits.
Exhibit No. Description
10.1 Amendment No. 1, dated as of
10
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