Good morning, everyone. I'm John Swenson, vice president of investor relations and treasury for NMI Holdings. Welcome to our twenty twenty investor day, this year virtual for the first time. We planned a valuable and impactful agenda and are delighted you're able to join us. Our speakers today are all presenting from remote locations, and we ask you to bear with us if we experience any technical difficulties.
Today's presentation will be displayed on screen alongside a video of management through each section of today's discussion. Audience members have the opportunity to submit questions at any time through the course of the presentation in the dialogue box located on screen. We ask that you please include your name and organizational affiliation when submitting your question. Questions will be aggregated and addressed during the Q and A session after the formal presentations. A replay of today's meeting will be available on our website at nationalmi.com.
Before we begin, please note that during the course of this twenty twenty Investor Day discussion, 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 today can be found on page 85 of this deck and on our website or through our filings with the SEC, which are also on our website. Also note that we will refer to certain non GAAP measures in this presentation and provide a reconciliation to the most comparable measures under GAAP on pages eighty three and eighty four, and on the investor relations section of our website. Now turning to our agenda, we'll begin with a message from Brad Shuster, our executive chairman and founder, who will take you through our founding vision, why that vision is coming into clear focus during this time of stress, and how it has positioned us to succeed going forward.
Then Claudia Merkel, our CEO, will detail our significant success to date and describe the substantial and uniquely valuable new business opportunity we see in front of us today. Norm Fitzgerald, our Chief Financial Officer, will highlight our achievements customer development, how we win customers in normal times and in times like these, and how we are leveraging technology to enhance our customer engagement and new business flow. We'll then hear from Rob Smith, our Chief Risk Officer, who will take you through our differentiated risk management framework, the tools we established and have been using since long before COVID emerged, as well as the strong credit performance we've achieved to date, and the specific actions we've taken to address emerging risks from the outside set of COVID. We'll wrap up with Adam Paltzer, our CFO. He will highlight our strong and resilient financial performance to date, our significant and differentiated capital raising activity since COVID, the near term financial impact of COVID-nineteen, and a perspective on how our long run financial profile, on our long run financial profile as the stress wanes.
Then we'll take your questions. We believe we have a great morning planned and thank you again for participating. Let me now turn it over to Brad Shuster.
Thank you for joining us today. I'll start on slide five. Our format is a bit different this year. We're virtual for the first time. But we have a great session planned and expect to cover just as much ground as we have when we've convened in person in New York in the past.
As we go through, you'll note that all the presentations are connected to a set of common themes. One, the significant success we have achieved to date, highlighting the success itself across many facets of our business, as well as the strategy that has driven our performance. Two, COVID, how it is impacting our market and our company and the decisive steps we have taken since the pandemic emerged to navigate effectively and position National MI for continued long term outperformance. Three, the resiliency of the housing market and the enormously large and valuable opportunity that it has created for us. And four, how we are well positioned to both perform through the duration of this stress period and thrive once the challenges of COVID clear.
The tagline that I'll leave you with on this page, that our goal is to deliver value for shareholders and secure our outperformance across all market cycles, is the same that I shared last year. And it turned out to be quite prophetic. We built National MI to deliver sustained outperformance across all market cycles And our performance through the first eight months of the COVID pandemic has validated these efforts and our strategy and positioned us to continue to fully perform going forward. Shifting forward to slide six. We were formed eight years ago with a clear vision of how we should engage in the market to drive value for borrowers, our lender customers, our employees, and our shareholders.
And our founding principles remain central to how we engage in the market and manage our business today. We are here to help borrowers. There is a social purpose to our company that we take seriously. And we help borrowers by helping lenders, our customers. We help them manage their risk positions and facilitate a greater flow of credit into the mortgage market.
To do this, we have to be a credible counterparty. Our lenders must trust that above all else, we will pay valid claims and we will do so quickly and without pushback. We are able to do this and do it well because of the approach we take to risk, technology, and our people. Building a business in a risk responsible way with an eye towards doing more, not less, with respect to underwriting, pricing, and reinsurance. Hiring talented people and establishing a culture where they feel fully invested in our customers' success and by extension, our success.
This approach has proven to be enormously valuable. We have established a broad national customer franchise with more than 1,100 active lender relationships, built a uniquely high quality insured portfolio, and delivered exceptionally strong financial performance. We have achieved our goal of delivering strong, consistent returns for our shareholders. And as we're proving with the resiliency of our performance through COVID, we have built a durable business that is well positioned for the long term. Turning to slide seven.
Each member of our executive management team has over twenty years of relevant experience in the insurance, mortgage, and financial services market and brings together a broad set of expertise and leadership abilities. Beyond the seven members of the team noted here, we have over 250 employees who are working hard every day to drive our company and deliver standout performance for our customers and their borrowers. I believe we have some of the best talent in the industry at National MI, and every accomplishment that I'll note through this presentation traces the hard work, expertise, and commitment of our broad team. Moving to slide eight. We've achieved a tremendous amount of success to date.
And while there is a natural temptation to look past historical performance and only focus on the future in times of significant dislocation, the success we've had to date is proof that our strategy works and taking stock of that success is important. The environment has changed, but we are a company that approaches the market in a responsible way and have been able to drive significant value while embedding a uniquely comprehensive approach to credit risk management in our day to day operations. Our first point of success are people. At National MI, our culture is a competitive advantage. It's the foundation on which we're able to deliver for our customers, our shareholders, and everyone else we engage with.
We've been recognized nationally as a great place to work each of the last five years, And I think you'll feel some of what makes us unique from your engagement with the executive team today. Turning to slide nine and success with our customers. Developing a customer franchise as a new primary mortgage insurer is not easy. It takes patience, focus, and a differentiated team and message. We have a 65 person national sales force that is pushing every day to establish new lender relationships and capture more and more volume from our existing customers.
They have been incredibly effective. You can see how significantly and consistently our customer base has scaled. Lenders continue to respond to our core value proposition of certainty and service. This message resonates just as much today as it did when we started in 2012. We have been consistent with our sales engagement and message through the course of the pandemic, And our sales team has continued to sign up new accounts and deepen our penetration, all while operating on a fully remote basis.
Overall, we see a real opportunity to help our lenders and their borrowers through the pandemic at a time when they need us most, and in turn to increase our reach in the market. On slide 10. The success that we've achieved with our customers is mirrored in the success that we've had in the growth and quality of our insured portfolio. At the end of the third quarter, we had $104,500,000,000 of primary insurance in force, up approximately 65% compared to the third quarter of twenty eighteen, and notably the first time our portfolio has exceeded 100,000,000,000. Most important, particularly in light of the COVID pandemic and increased macro stress that has now emerged, is the quality of our book.
We have focused from day one on building a durable franchise in a risk responsible manner, and we have succeeded. We have worked hard to establish a comprehensive credit risk management framework, and in doing so, 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 our portfolio. We have been able to achieve a unique combination of growth and quality in our insured portfolio and are optimistic we will continue to do so in a meaningful way going forward. Flipping forward to slide 11.
The success that we've achieved with our people, our customer franchise, our portfolio, and our credit risk management framework has translated through to our financial performance. We were delivering best in class growth, profitability, and returns prior to the onset of the COVID crisis. And while COVID has naturally impacted our results to a degree, the strength of our financial performance prior to the onset of the pandemic provided us with a well capitalized balance sheet, conservative funding position, and robust liquidity profile important foundational strengths as we navigate through this period. We have continued to deliver strong financial results in the face of COVID stress, with profitability and strong double digit returns in the second and third quarters. And this performance is proof that our strategy drives financial results and value, and our long term opportunity post COVID remains fully intact.
Moving to slide 12. We entered COVID in a position of real strength with the highest quality insured portfolio and a comprehensive credit risk management framework, with a strong balance sheet that was protected and enhanced by our expansive reinsurance program, with a constructive and collaborative culture which has taken on added importance in a distanced world, with expense, discipline, and efficiency, and with a value added connection with our customers. We built on this strength with immediate and decisive action at the very onset of the pandemic, and we have continued to navigate through COVID with real impact. Our transition to a remote work environment was seamless. Our sales team is connected and has found innovative ways to advance our customer engagement.
We made changes to our underwriting guidelines and processes and increased our pricing to account for the unprecedented nature of COVID and its impact on the macro environment. And we raised over 1,400,000,000 of capital in six transactions across the debt, equity, ILN, and traditional reinsurance markets, achieving standout success, meaningfully expanding our funding capacity, and largely ring fencing our risk exposure. The strength with which we came into the pandemic and the broad based and decisive actions that we have taken in response to the stress give me the highest conviction about our ability to perform and build value through and beyond the COVID crisis. Flipping forward to slide 13. We took early and decisive action.
And while all that we have done will be valuable no matter the course of the virus and its impact on the housing market, it is most valuable now that the housing market has proven to be so resilient and the new business opportunity in the mortgage insurance market so compelling. 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 housing. Demand for homeownership has been remarkable. With work from home directives and the emotional push to secure a safe environment for oneself and one's family driving an exceptional, and we expect sustainable increase in purchase activity. Record low rates are added fuel, helping to sustain affordability.
And while demand has risen sharply, supply is growing increasingly constrained. As with any market, when demand meaningfully outpaces supply, prices will rise. And we have seen sustained house price appreciation nationwide across almost every market. Forbearance data from the GSEs is showing declining utilization, a favorable leading indicator about potential default experience and one that we see directly in our portfolio as well. On slide 14.
Policy efforts are also playing an important role and stabilizing role, and we applaud the work of the FHFA, GSEs, administration, Congress, and others. 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, and will also help speed the ultimate pace of economic recovery in The US. We fully endorse the various forbearance, foreclosure moratorium, and other assistance programs that have been introduced 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. We encourage policymakers and regulators to maintain their focus and offer continued support as needed to carry homeowners through this period.
We expect the core focus will continue to be on the borrower, helping deserving individuals access homeownership and doing so in a way that guards against systemic risk. Private mortgage insurance has been and remains the best option to support both of these objectives. Helping borrowers gain access to the mortgage market when they would otherwise be shut out and putting permanent private capital in front of taxpayer risk. COVID has brought a sharp focus the important role that National MI and the broader private mortgage insurance industry play in supporting a healthy and functioning housing finance system that works for borrowers, lenders, and taxpayers across all market cycles. And we're eager to continue sharing this perspective in Washington.
We did note the FHFA's release of its final enterprise regulatory capital framework for the GSEs yesterday. And on first review, we believe it largely follows the initial draft, which recognizes the important benefits of the mortgage insurance industry brings to the GSEs. Shifting to slide 15. A key perspective I'd like to leave you with today is that we have a significant opportunity ahead of us. National MI has a strong foundation and a proven strategy delivering growth, credit quality, and financial returns.
We have taken decisive action and are navigating through the COVID crisis with real resiliency. The housing market is a bright spot amidst the COVID stress environment, and the need for mortgage insurance has never been greater. The new business environment is exceptionally strong with a unique combination of volume and value. And it's providing us with a clear opportunity to continue doing what we do best, responsibly deploying capital to support our customer base and drive shareholder value. Thank you for your time today and for your ongoing interest in and support of National MI.
With that, I'll turn it to Claudia to continue taking us through the day.
Thanks, Brad, and good morning, everyone. I'll begin on slide 17. I'm excited to connect today and share all that National MI has done to build a valuable and durable business, react with speed and success to the unprecedented nature of the COVID pandemic, and position our company to deliver going forward for our customers, their borrowers, our employees, and for you, our shareholders. As we talk today, I'm incredibly optimistic about the opportunity ahead for National MI. And my optimism starts with all the success we've had to date.
We built National MI to deliver sustained outperformance across all market cycles, and the resiliency of our performance through COVID validates our efforts and highlights the value of our strategy. Our success to date, from a culture standpoint, creating an inclusive environment that fosters collaboration and creativity. From a customer standpoint, building relationships based on value added engagement and differentiated value proposition from a risk management standpoint, leading with discipline in everything we do and putting credit risk management at the forefront of our strategy. From a portfolio standpoint, achieving a unique combination of best in class growth and quality and from a financial standpoint sets the stage for our resiliency through COVID and continued performance over the long term. Shifting to slide 18, I'll share some additional detail on our success to date, starting with our culture and people.
We've always prided ourselves on our culture and believe the quality of our team and the diverse, inclusive environment that we have established are key competitive advantages, and this is more true today than ever before. Connectivity, collaboration, and support have taken on added importance in a distance world. We have two sixty one employees who are engaged and highly motivated to deliver for their colleagues, for our customers and their borrowers and for our shareholders. They have been working tirelessly over the last eight years and from their homes over the last eight months to build National MI into a market leading mortgage insurer. Our employees are fully aligned with our core values and the critically important social role that National MI plays in helping borrowers access all of the benefits of homeownership, something that is more valuable and that we are more proud of today than ever before.
Turning to Slide 19 and the success we've had growing our customer franchise and deepening our lender relationships. We are a value added partner to our lenders, putting the right salespeople who have leadership experience in the right seats and having them sell the right value proposition of certainty of coverage and service. This has worked for us to a great effect, and you can see how significantly and consistently we have grown our franchise over the last several years. Even during COVID, our sales team is signing up new accounts and deepening our penetration, all while operating on a fully remote basis. We have added nearly 100 new lender relationships over the last twelve months.
Norm will take you through a lot more detail, but this is an important time, a time of evolution from a customer standpoint, which positions National MI exceptionally well in the market going forward. First, lenders need MI support more than ever before. They are dealing with an unprecedented spike in volume and rising demand from high LTV borrowers. It's important for us to meet this increasing need, and we have. The strength of our position coming into the pandemic has allowed us to remain fully customer focused throughout, and we have been consistent with our sales message, our price delivery through Rate GPS and our underwriting response times and operational readiness.
We are delivering in a business as usual way when our customers need us most, and this stands out as a notable positive. Second, lenders and borrowers are evolving along the digital spectrum faster than they ever have before out of necessity. This evolution is opening new opportunities for National MI, is providing us a path to quicker, more meaningful, and more efficient engagement with our customers, and sets us up well to continue expanding our customer footprint going forward. Slide 20 is critical. As an insurance company, we take risk.
That is our purpose. Taking this risk responsibly, reviewing it and understanding it in detail, being selective as to what we ultimately put on our books, and establishing appropriate concentration guidelines is critical. Our portfolio is the highest quality in the MI industry by any measure. LTVs, borrower FICO score, debt to income ratios, or layered risk. And this is by design.
Our focus on building our business in a long term, risk responsible manner comes through in the profile of our insured portfolio. And we'll take a look in a few slides how it's helping us deliver best in class credit performance through the COVID stress. Turning to slide 21. We have positioned National MI to survive and thrive through significant stress, and the conservatism with which we have managed our business across the board is valuable as we navigate through the COVID crisis. There is a tremendous amount that goes into building a business like ours, but from day one, we have recognized that there is no bigger long term driver of our success than credit performance and how well we manage risk in our insured portfolio.
And our philosophy all along has been that in order to get full benefit from risk management strategies when times are tough, you need to have implemented them when times were good, and this is what we did. We have a comprehensive credit risk management approach that is different from the rest of the MI industry and spans three foundational pillars. One, individual risk underwriting, where we aim to directly touch, if you will, each loan that we insure, getting a loan file, reviewing it, making a decision based on data, and preserving access to that valuable information for future periods. Two, the use of Rate GPS, our proprietary multivariate pricing model that allows us to fully price for the risk we're taking and to price away the risk we don't want in our portfolio. And an expansive reinsurance program, which covers nearly all of the risk we have ever written as a company and essentially ring fences our exposure in periods of broader uncertainty or credit volatility.
In this framework and our decision to fully invest in it and deploy it long before the onset of the COVID pandemic that has insured portfolios so well positioned to perform through the current stress environment. Moving to slide 22, we can see the net result of our credit risk management work. We have the highest quality insured portfolio in the mortgage insurance industry, and this is driving differentiated performance through the COVID stress period. We have the lowest default rate experience and net loss exposure of any in our sector. And importantly, as we're building NIW volume at record levels, we remain equally committed to prioritizing credit quality and risk adjusted returns, the hallmarks that have helped us navigate with discipline and outperformed thus far.
Our strong operating performance has driven significant financial success. Prior to the onset of COVID, we achieved best in class growth, profitability and returns. We built a strong balance sheet and delivered accelerating growth in book value per share. While COVID has obviously impacted our current results, our earnings profile and financial performance has proven to be highly resilient during this period, and we continue to see significant long term financial opportunity beyond the immediacy of the COVID pandemic. Turning to slide 24.
We have a real opportunity in front of us to outperform through COVID and drive long term value. We have always managed our business with risk at the forefront, and this is proving to be incredibly valuable with the onset of the pandemic. Our franchise is stronger than ever. We had $104,500,000,000 of insurance in force at September 30, and we have by far the highest quality insured portfolio in the mortgage insurance industry. Our credit performance eight months into distress has been encouraging, and we have the added benefit of our extensive reinsurance program, which serves to limit our loss exposure on nearly every policy we have ever written in periods of increased volatility.
We have a conservative balance sheet with $1,700,000,000 of GAAP capital, a significant PMIERs excess position, a highly liquid and high quality investment portfolio, and broad access to capital and reinsurance markets. We have a tremendous opportunity to leverage all that we have done right to date and capitalize on what is proving to be an enormously compelling new business environment. Mortgage origination volume has exploded. House prices have been resilient, and MI industry volume is pacing to be nearly $575,000,000,000 in 2020, by far the largest market we have ever seen. Volume is there, and equally important, the pricing, risk profile and unit economics on this new production are equally strong.
On slide 25, I'll share a perspective on the mortgage insurance market overall. The new business environment is remarkably 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.
And record low rates are added fuel, increasing affordability and drawing additional buyers to the market. The mortgage insurance value proposition and need for MI support has never been higher. MI penetration rates are increasing as well qualified borrowers are searching for all opportunities to access homeownership. Overall, we expect total industry volume near $575,000,000,000 this year. We've never had a $400,000,000,000 MI market, let alone one that is well in excess of $500,000,000,000 and approaching $600,000,000,000 Turning to slide 26.
Against the backdrop of this record MI market, we see a significant opportunity to continue responsibly growing our new business platform and insured portfolio. We have a strategy that works. We have scaled our customer franchise and delivered industry leading growth in new business production while maintaining the strictest credit risk discipline in the industry and delivering the strongest returns in the market. We have always prioritized risk responsibility, deploying capital in a disciplined way to ensure that our growth is matched by credit quality and returns. The current market presents an enormously attractive opportunity for us.
We have a direct path to deploy capital and capture significant new business volume with strong risk adjusted returns that are meaningfully in excess of our cost of funding. Today's volume, which is large, well priced, high quality, and should prove to be highly persistent, will seed our future growth and financial results and is helping us build significant incremental embedded value in our portfolio. Shifting to Slide 27. We are excited about the opportunity ahead of us. National MI has a proven track record of growth, credit quality, and financial returns, delivering significant value for our shareholders.
As we navigate the post COVID environment, we will continue to leverage our proven strategy to expand our customer engagement and market presence while writing new business and growing in a disciplined manner. We have a clear opportunity to continue doing what we do best, responsibly deploying capital to support our customer base and drive shareholder value. Thank you for your time today and for your ongoing support of National MI. I'll now turn it over to Norm Fitzgerald, our Senior Vice President and Chief Sales Officer.
All right. Thank you, Claudia. And I'm happy and grateful to be here. And thank you to all of you for taking time to hear our story today. As Chief Sales Officer, I'm very proud of what we've accomplished as a sales team and as a company over the past eight years.
And I'm especially gratified to see what my group has accomplished in 2020 despite the challenges we've all faced due to the COVID nineteen pandemic. Earlier, you heard Brad and Claudia talk about our founding principles, our culture, and our team. Today, I wanna frame you where we are now in terms of our customer franchise compared to where we were when we started, and to show you why this matters and why this works. As the newest entrant in the MI space, we had to build our sales team and our customer base organically. One master policy at a time, person by person, account by account.
And I assure you that was a challenging process. However, we've been incredibly successful in doing so. And there are advantages to being the newest entrant that accrue to our benefit, which I'll discuss further. When Brad and Claudia started building the sales team, they asked customers to recommend the salespeople who they believed were the most effective at winning and maintaining their business. And then they went out and hired those people.
We've continued to strategically build a team of strong and resilient people who represent the core culture and values that we were founded on. The ones that made me wanna join this organization and be a part of this culture. I believe that today we have the best sales force in the MI industry. Not by chance, but by design. Our success shows up in the continued growth of our account base and the growth of our NIW, both of which hit new records in third quarter.
Today, I'm going to take you through the dynamic results we've had we've achieved so far, and I'll share what we describe as a digital transformation in the mortgage industry and the opportunity that it creates for National MI. I'll take a moment and walk through the COVID nineteen social distancing and travel restrictions that have impacted the way we engage with our customers. And then I'll conclude with how we've adapted and evolved in order to use this disruption to our advantage and how these changes will positively impact our performance in the future. We've been incredibly successful at activating new accounts for years. The continued account growth is the fundamental driver of our record NIW and it's fueling NMI's industry best growth of insurance in force.
I love a challenge and I love to build things the right way. That's what attracted me to NMI and why I eagerly joined this team back in 2014. My very first message to our team on my personal day one was if we are going to succeed, we need to grow our account base. We need to know our customers, especially their process. And no matter what, always, always keep moving forward.
At that time, we only had a handful of accounts. But the message resonated and we executed and we locked arms and moved forward together. You'll see here that by September 2017, we had grown our active base of customers to 855 accounts and continued that momentum year after year. Through September 2020, we had grown to 1,167 active accounts. Nothing, not even a pandemic, clouded our vision nor ceased our march forward.
You can see here how the account activation has been the catalyst of driving significant year over year NIW growth. Again, looking at September 2017, where we drove 20,000,000,000 in NIW, and by adding more accounts, we subsequently soared to 55,000,000,000 as of September 2020. We keep growing every year. Adding and activating accounts is how we keep driving incremental NIW, which helped us more than double our primary insurance in force from forty eight billion at the 2017 to surpassing a 104,000,000,000 as we exited September 2020. Yep.
We've been tested this year just like everybody else. However, as the newest entrant in the MI space, we've been prepared to face challenges every year. Our team has built a strong resilience that I believe prepared our company for these unprecedented challenges better than any other company in our industry. 2020 has been a year of many new trials. A large part of my job as chief sales officer has been to find ways to keep our team connected and productive, internally and externally, in a near complete virtual environment.
Keeping our team mentally strong and focused on goals we set years ago in a time when we had never heard of the word COVID and most of us not knowing the difference between Zoom, Skype, or GoToMeeting. But things change fast, and I'm fortunate to have assembled a talented team with the resolve and the desire to evolve, and that is who we are. Customer development is imperative for us. As I mentioned, we started from scratch eight years ago, and now we're at nearly twelve hundred active accounts. That's always been our focus.
What I share with my team is we can't even begin to have a conversation of volume until we have an approved master policy in place, and only after we're turned on and visible in their system. That's the only way to secure our momentous first unit. This is what we refer to as activated. In today's world, knowing our customer's entire loan manufacturing process, front end to back end is essential. In order to win business, we have to meet our customers where they are.
And today, more often than not, that means digitally and at home, any way that we can. And we proved we can do this virtually. We've activated 421 accounts since 2017, and that number represents 70,000,000,000 in NIW opportunity previously unavailable to us. We added 58 customers during COVID nineteen, and as of November 18, year to date 2020, we have activated 87 new accounts, including 23 in the top 600 lenders in the country, representing about 11,000,000,000 of new opportunity, NIW opportunity for us to earn, all during the pandemic. With everyone working from home, socially distancing, and the industry inundated with significant origination volume, I'm elated by our team's ability to continuously add new accounts at a time when lenders are more distracted than ever before.
This speaks to our diligence, to our team, and to the compelling value proposition that we provide as a company. Our success in account growth allows us the opportunity to serve an incredibly diverse customer base. In the third quarter, we generated NIW from a record number of unique accounts, all varying size, lender type, structure, and geography. We are always consistent with what we offer, and we treat every account equally, regardless of their volume or their size. Rate GPS in our digital platforms, along with an engaged and forward thinking team, has enabled us to effectively serve this broad account base more efficiently than ever before.
I get this question a lot. Why do we win? And my answer is always, it depends. You see, every customer situation is different. For one customer, it may involve our upfront underwriting program and accelerated precision relief.
For another, it might be about our ability to seamlessly integrate into their loan origination systems. For some, it might be their trust in our counterparty due diligence review process. And maybe for others, the strong relationships built with our team and our executive level engagement. And we can never forget the power of a best in class customer service team, delivering personalized and in-depth support, which paradoxically matters more than ever to our partners working from a remote environment. We provide critical customer support that spans the entire mortgage insurance life cycle, from origination to claim.
Our Sensible Servicing program demonstrates the confidence of our strong commitment and reflects our claims paying approach, which is important to our customers because we say what we do and we do what we say. We offer a variety of value added programs and education to our lender customers on a wide range of topics, including helping lenders grow origination volume, improving underwriting skills, and engaging prospective borrowers. We are committed to learning, and we in turn are committed to sharing that knowledge and teaching. I can say as a general matter that an increasing number of our conversations with customers, both current accounts and prospects, involve what the industry refers to as the digital mortgage road map. We've been at the forefront of these customer discussions.
We are an innovative thought leader on this subject and have established significant technical credibility because of our modern IT platform and our powerful rate GPS system. As our industry continues to adopt and leverage technology at a rapid pace, we have leveraged opportunities to consultatively engage with our customers and drive awareness as they develop their digital strategies. It's become a big differentiator for us, and we are leveraging it to broaden our footprint in the market. We began this evolution, this journey down the digital road map years ago. COVID nineteen was not the starting line, but it did hasten our steps.
The mortgage industry is becoming more digital. Those who can efficiently handle more volume with accuracy and shorter lead times at the lowest cost have a competitive advantage in today's market. That's just the plain truth. For customers, they're compressing the mortgage cycle. Prospective borrowers are applying online.
Credit checks and FICO scores are getting processed instantaneously. MI quotes are generated and priced electronically. Loan documentation is seamlessly uploaded through secure lender portals. And all this with essentially no human touch. This technology shift is driving efficiency and flexibility for our customers and for NMI.
And the trend is also expanding our new business opportunity because technology disrupts lender habits and legacy relationships. We win if we can help the lender do it faster, more efficiently, and with greater precision. And we are. This trend is allowing us to capitalize on our competitive advantage because we are the disruptor. We are a technology forward company, and we have pivoted to the digital engagement model and seamlessly.
Spareheaded by our powerful Rate GPS platform, which is driving both new account growth and wallet share gains as our lenders recognize our superior capabilities. Also, because of technology advantage, we can now target and serve a broader and more diverse lender base efficiently. That is exactly what we're doing and what we're doing well. Now that the industry and our lenders have embraced the digital mortgage process, NMI's powerful rate GPS platform being fully integrated within all the major technology systems helps a new company like NMI grow faster. You see, once we have a master policy in place with a customer, we are positioned to receive the first application from that customer the very next day.
We are immediately part of their process. In the past, attaining approval was just the beginning of another long journey toward activation. Digitization and technology have nearly eliminated old habits, legacy advantages, and leveled the playing field for all six MI companies. We've seen our competitors roll out their own rate engines, but none have moved as quickly or comprehensively as we have. We are pushing more than 95% of our volume through Rate GPS.
For practical purposes, it is the way that we engage with the market. Our customers have embraced it. Why? Because it's simple, because it's fair and rational, and because it works. We will continue to lead with technology and Rate GPS because it's a competitive advantage for us in the marketplace, and it helps us stay visible to our customers and nimble in any risk environment.
The COVID nineteen pandemic and the remote work directives in the market have forced us to be more creative in how we engage with customers. And again, we were well equipped to pivot to a digital world because we already had been utilizing all of the digital tools in our arsenal. Face to face meetings are rare. We are leveraging social media, email, and text based communication platforms to stay connected, to stay current, and to provide value. By applying our tools, particularly in this environment, one salesperson can maximize their time to stay connected with a much broader customer base than would have been possible if he or she was spending more than half of their time in traffic or in airports.
And I, for one, don't miss that. We don't see this as a disadvantage. We've embraced the new normal. We see this as our opportunity to ensure we foster our strong customer relationships more effectively and more efficiently than ever before. As I noted in an earlier slide, we have 1,167 active accounts.
In the distant past of 2019, 1,167 active customers also met tens of thousands of call points and touch points. Today, we are evolving so quickly that 1167 active accounts translates to about 1,167 digital call points, easily tracked and monitored for efficacy. You see, in my opinion, the most significant change in our efforts has been our digitization and technology combined with the COVID nineteen national shutdown, forcing all companies to work from home, forced an exponential and immediate change in account coverage starting in March 2020. Our hardworking and adaptive customers became digital almost overnight because they had to. And our NMI team was helping guide them and ready for this every step of the way.
Most cautious companies would never have attempted to move all operations and sales coverage from the office or from the field to a 100% remote. NMI has proven in 2020 that we were ready, willing, and able to do our job digitally and to do it well. Now on to our strategy and focus on large opportunities, specifically the top 600 largest opportunities, and why this focus and strategy has been key to our success now and will be for years to come. What we show here is what the top 600 MI generating lenders represent when we look at market share. The top 600 accounts generated approximately 92% of the entire 2020 estimated 575,000,000,000 MI market.
Our team's done a great job driving close to 1,200 active accounts and many you see are within this top 600. But we have so much more opportunity to grow, and focusing on the accounts within this group is the most efficient way to use our team's time and talent. We are already working with and growing share with 395 of these accounts. Meaning, as of today, we are actively competing for business for 460,000,000,000 of the 529,000,000,000 opportunity that the top 600 generated. Where we can grow quickly is by activating the 81 accounts here that represent about 40,000,000,000 more in NIW opportunity for us.
In other words, we've already worked with these lenders and now obtained an approved master policy. We have it. Once we get fully ingrained in their system, we can then activate them as in obtain that first unit of NIW. And we will be focusing on driving these accounts to activation in 2021. Our other focus will be on the opportunity that lies within the roughly 30,000,000,000 that falls within the 124 lenders we are still working with to obtain a master policy, and we will continue our efforts to add them to our list of partners.
As I mentioned on the previous slide, digitization and technology have transformed a highly inefficient mortgage industry into a highly efficient one. Of course, course that we were walking down for the past few years that turned into a sprint in 2020. And just for added perspective, when we look at even the mid to lower accounts in the top 600, These individual lenders represent on average over 250,000,000 a year in new NIW opportunity. In 2020, we're able to work through challenges using technology and service to deliver record NIW from a record number of active accounts. In 2021, our laser focus on the top 600 MI opportunities in the country, combined with our continued development of our digital sales platform, will help us maintain and grow within our existing accounts while helping us open more doors for our future.
In summary, we've been incredibly successful, driven by a seasoned and accomplished team. We have approached the market with a differentiated message and a clear and meaningful value proposition. I am very grateful to be a part of this team and this mortgage industry. I'm so happy I made the decision to join the strong NMI team back in 2014. And as Brad had promised me at that time when I joined, to have the best ride of my life.
We have a huge advantage through Rate GPS in our digital platform when it comes to efficiently engaging with customers and winning their business. So again, why do we win? We win because we have the best people in the field, in the home office, and in the executive suite, and that matters. We're excited about what we've been able to accomplish in this market, but even more about the opportunity that lies ahead. I thank you all for your time.
And with that, I will turn it over to our chief risk officer, Rob Seth.
Thank you, Noah. And, hello, everyone. Thanks for logging in today and hearing our story. We're gonna go to the next slide, please. I'm gonna go through a few slides that cover our risk management approach, how we select the risk that comes into our portfolio, how we underwrite that risk, and how we distribute our risk in the reinsurance markets.
I will follow with some detail on how this framework has helped us through the recent economic turmoil, and finally provide our perspectives on how the economic stress is expected to impact the housing market in general, and our industry in particular. We believe that our risk management culture and framework helps put homeowners in sustainable housing situations and helps to protect the long term return profile and balance sheet of our company, reducing earnings volatility and capital stress under adverse credit events. Starting with our risk management framework, it is important to recognize that the credit environment in which we operate remains strong, and in fact, has become stronger because of the recent disruptions in the economy. While the industry credit profile has been improving steadily going into this crisis, underwriting and credit tightened further in response. Both GSEs and mortgage originators reacted quickly to the economic turmoil to ensure borrowers applying for mortgages were thoroughly and properly vetted.
Borrowers getting mortgages today are rigorously evaluated for their ability to repay. In addition, the regulatory guardrails put in place after the Great Recession largely remain in place, and the losses experienced during the Great Recession now form the basis for the minimum financial requirements that must be met to operate in the industry. The lessons of that crisis have not been forgotten or ignored in the past years. All of this has helped ensure the housing and mortgage industry are contributors to the economic rebound, not headwinds that the economy has to overcome. As Brad discussed, the economic activity in the housing sector is tremendous.
Operating within this positive environment, we have our own robust risk management practices. These practices have served us well during the recent upheaval, and they give us the confidence that we have minimized the unknown unknowns, and that we understand well the potential paths our portfolio performance might take given the economic outlook. We will now discuss more specifics of our approach towards managing the risk in our insurance portfolio. At a high level, we view our risk management approach as having three main pillars. The first two are concerned with the risk selection, individual risk underwriting and risk based pricing.
The third deals with how we manage our risk once it is aggregated. These pillars are interrelated. By performing such extensive loan level reviews, we can better understand the underwriting environment we are operating under and our customers' approach to manufacturing mortgage loans. Better understanding originators' mortgage manufacturing process gives us one input to our pricing model, which also incorporates many other risk attributes to shape the credit risk profile of our new originations. When it comes time to purchase reinsurance on our originations, we have seen the benefit of our risk selection practices in improving our execution, and we gain valuable insight into what our reinsurance providers, whether they be traditional reinsurers or capital markets investors, are most concerned about.
Now we'll explore each of the pillars individually. As was discussed earlier, we have a unique approach to the industry, born from the industry past. The MI industry that many of us experienced, the pre Great Recession period, underwrote very little of the risk it was ensuring. Instead, the prevailing practice was to delegate underwriting authority to the customer. So the originators underwriting the loan also served as the MI underwriting.
Mortgage insurers would then periodically sample the loan files, rarely more than 5%, testing to determine whether their underwriting guidelines were being followed. This practice accounted for roughly 80 to 90% of pre Great Recession industry volume. Post crisis, we have seen some resurgence in direct, non delegated underwriting, but it still accounts for only about one third of industry volume. More than 60% continues to come through what we call the delegated channel. Since our founding, we decided to approach things differently, and to directly underwrite or validate post close the vast majority of our production.
We brought in innovation to the market that we call delegated assurance review, or DAR for short, which is a process for validating the underwrite on 100% of an originator's production shortly after the close of the loan. You can see this breakdown for our year to date production, with over 90% of the loans we insured going through either a full non delegated underwrite or a post close validation process. We believe this is more than twice the industry average. The benefits to performing this level of underwrite and validate are many. By underwriting and post close validation, rather than relying on QC sampling, we can identify emerging risk trends early and take corrective action.
On an individual loan level, action can be taken before loans become delinquent. When problem loans are easier to correct for both originators and borrowers. Highlighting issues in the manufacturing process then prevents defects from reoccurring and impacting multiple loans. This is especially important in an environment like today's, where underwriting guidelines have been changing rapidly. It is not uncommon for an underwriter at one of our customers to misinterpret the rapidly changing guidelines.
Since we work closely with the GSEs on new programs that impact the MI industry, we are able to clarify the guidelines and help the originator prevent future underwriting errors. This level of visibility would be far less clear if we were relying on delegated underwriting with QC sampling for a large percentage of our volume, where even if errors were detected, they would have been with some delay after errors occurred in many more loans. An additional benefit for us and our risk sharing partners is data accuracy. By reviewing so many files post closing and instituting a process where post close loan data is used to correct discrepancies that may have been submitted pre closing, we can ensure that our data is the most reflective of the true borrower situation at origination. One of the historical weaknesses in the MI industry was the inability for individual companies to take their own view on credit risk and change that view as expressed through premium rates.
The root of that weakness was technology related. Originators' loan origination systems could not talk to MI systems, so they were constrained to price MI statically through rate cards and require rates from all competitors to be the same. While one industry participant introduced more dynamic, or risk based pricing, several years ago, the interconnectivity in the industry was still lacking, constraining the reach of this approach. Much has changed in the past few years, so that today, risk based pricing engines, where loan origination and pricing systems request premium rates directly from MI systems, are easily accommodated. Recognizing this changing landscape, we started development of Rate GPS, our dynamic pricing engine, and fully deployed it in June 2018.
And once deployed, we use it to express our views in credit risk. Beside loan level risk factors such as loan to value, credit score, debt to income ratio, a risk based pricing engine allows us to consider many more factors that rate cards cannot, like geographic risk and lender attributes. And we can consider all these factors a combination. With a powerful tool like this, it is important to use it. Having a risk based pricing engine is not unique in the industry, but having the discipline to use it to select and price the vast majority of business, over 95% in our case, is not a decision that has been universally made.
Naturally, as we impact new insurance written, we eventually see the impact on the insurance, of course. Due to the high volumes we are experiencing today, our portfolio profile is increasingly reflecting recent NIW trends. This positions us well for many periods in the future, as recent additions to the portfolio will generate strong returns with minimal losses for what we expect will be a long period of time. We are building a strong base from which to continue our growth. There are some risks that cannot be mitigated through underwriting pricing alone, which brings us to our third pillar of risk management.
While we can reduce our exposure to weak loan manufacturing processes and layered risk at the loan level, there's still exposure to adverse economic cycles, whether they be national or regional downturns that impact all borrowers to some degree. To mitigate this risk, we feel it makes sense to distribute that volatility throughout the broader financial system, where it is better priced and held. In effect, despite being a monoline insurance company, we can take advantage of others' diversification benefits. We do this in two ways: through the traditional reinsurance market and through the capital markets. While there are pros and cons of both, there is a larger benefit of participating in both markets, so we do not become over reliant on one or the other.
The net result of our reinsurance programs is as designed: we stay on loss for expected or near expected losses while transferring mezzanine in remote risk. As structured, we would only come back on risk in economic scenarios that far exceed those experienced during the Great Recession. And importantly, that reattachment would occur many years in the future, a scenario that we believe is very remote. This slide shows a high level example of the impact of reinsurance. While providing us some protection in even less stressful scenarios, as stress losses increase, the benefit of reinsurance increases.
As with our underwriting and pricing, we feel the cost of this coverage is far outweighed by the benefit we derive, both in good times through the capital relief we achieve, and in not so good times when we reduce earnings volatility. This is a significant advance in the past practices of the MI industry, where very little risk was reinsured through real reinsurance structures. Beyond the risk transfer benefits of reinsurance, it is also an effective source of capital. Not only are these structures less expensive than equity due to their remote loss nature, in times of stress, when delinquencies increase, these structures absorb much of the increase in PMIERs requirements we might face. Under our quota share reinsurance treaties, we receive credit for PMIERs risk based required asset amounts on CDER risk in force.
As our gross PMIERs requirement on CDER risk increases, our PMIERs credit automatically increases as well. Our ILN transactions are overcollateralized, in that we have more ILN notes outstanding and cash equivalents held in trust than we currently receive credit for under PMIERs. To the extent our PMIERs requirement on ceded ILN RIF grows, we receive increased credit under the treaties. In the event these structures stop amortizing in times of stress, as they are designed to do, overcollateralization grows, as does the potential for larger PMIERs credit if needed. Let's now talk about the impact the recent COVID stress has had on our industry, our portfolio, and our outlook on how things will play out going forward.
The first thing to understand about the current economic disruption is that it is not nearly the same in nature as the Great Recession. Going into March, the housing market was in exceptional shape. Supply was and remains limited after twelve years of constrained building. Demand was driven by buyers who could qualify for fixed rate amortizing mortgage products based on their documented income under credit guidelines that require an analysis of their ability to repay their mortgage. The EMI industry remains capitalized to withstand Great Recession level losses without consideration of any future income from premiums or investments.
And policymakers and market participants had learned from the financial crisis on how to mitigate losses, what programs work best to keep people in homes, and were prepared to intervene early without fear of bailing out irresponsible actors. And of course, we had our tools in place. We and other participants changed guidelines quickly to respond to the uniqueness of this crisis. Guidelines regarding documenting income and employment were tightened to ensure borrowers had the ability to repay, not just based on historical income trends, but on increased scrutiny of future ability, recognizing that historical patterns of employment and income were much more likely to be disrupted in today's environment. We were and are in a unique position to ensure those tighter guidelines were followed, given that we individually underwrite or validate the vast majority of our loans.
And given the quickly changing environment, it was important to confirm that new rules were being followed. And also, given that we now control our pricing, we were able to adjust premium rates to reflect the increased uncertainty in the housing market. And that we did, quickly increasing rates to ensure we are appropriately compensated for what was a volatile economic outlook. The result of the combination of these responses can be seen in the mix of business we originated over the past few quarters. While our NIW credit quality was strong heading into this crisis, it improved even more as a result of our reaction.
Pricing contributed partly to these trends, but not entirely. Tightened underwriting also prevented lenders from originating riskier loans. In some cases, originators restricted themselves, trying to avoid loans that immediately went into forbearance, and for which they would pay a penalty to sell in the secondary markets. The result is that the mortgages we insured over the past two quarters were taken out by extremely well qualified borrowers who were scrutinized more than most mortgage applicants have been in recent history. This stress period is allowing us to originate a large, high quality, persistent book of business that we believe will provide significant long term value.
Let's start. Highlighting the value of practicing good risk management in good times, when we sought additional protection during this time of uncertainty, those reinsurance markets we cultivated during more benign economic environments were receptive to providing further coverage. The fact that we were able to execute a quota share agreement and a regular way ILN following the outbreak of COVID and were the first to do so speaks highly of the risk management discipline we have demonstrated over the past few years and the decisive action we took following the outbreak. And just as we were making changes to our underwriting and pricing, we saw the federal government and the GSEs enact sweeping policy stimulants, including forbearance and foreclosure moratorium programs. These programs have been incredibly beneficial because they allow borrowers to defer mortgage payments at a time of acute stress, providing a bridge to an eventual economic recovery or a new job.
As I mentioned, leading up to the onset of pandemic, the industry was in excellent shape. Participants avoided putting borrowers into unsustainable situations, and rules ensured that market participants were strongly capitalized to withstand stress events. And the lessons have been learned to intervene early to ensure borrowers stay in their homes and avoid the cascading wave of defaults that creates a vicious cycle. At the advent of this event, policymakers and market participants quickly put in place options for borrowers who faced economic uncertainty. Forbearance programs that were not available during past stress events were widely offered, and as we can see, widely accepted.
When times were most uncertain at the advent of this economic turmoil, borrowers took up forbearance quickly. Today, the impacts of COVID on the economy are certainly not gone, but are much better understood, so borrowers who have more certainty in their situations, or have improved their situation, have been able to exit forbearance, and in almost all cases continue paying their mortgage. Giving borrowers this accommodation will result in much less economic disruption in the long term, as borrowers are given time to resolve their issues without facing the monthly stress of a mortgage payment which might not be payable and being pushed into a wave of distressed selling. Although we've seen similar results in our own portfolio, we thought it would be instructive to look at some helpful data provided by one of the GSEs with the benefit of a larger population, to understand how early forbearance resolutions have worked out. We can see that very few borrowers so far are going all the way through liquidation.
Of borrowers who entered forbearance in March and exited in July, only zero point three percent of borrowers went all the way through to liquidation. Only zero point six percent needed a modification. On the other hand, thirty eight percent of forbearances that were resolved never missed a payment. They simply canceled the forbearance and or prepaid the mortgage. Another eight point five percent who had missed payments also prepaid.
Thirty point nine percent of missed payments simply caught up. One point seven percent entered a repayment plan, agreeing to temporarily pay a higher mortgage payment until they paid off their missed payments. And finally, twenty point five percent took advantage of the new payment deferral option, where they can tack on the missed payments to the end of the mortgage without penalty. So as we can see, nearly 99% of these forbearances either never miss payments, are fully caught up on the payments, in the process of catching up, or paid off entirely, thanks to the assistance provided. Less than 1% of needed modification have been liquidated.
Our credit performance through the COVID stress has been very strong. And note that the vast majority of our defaults related to the COVID crisis are borrowers who are participating in forbearance and other assistance programs. Eight months into the pandemic, we are seeing encouraging performance trends. Defaults peaked at a low absolute level. They did not come near the 15 to 20% some industry observers have predicted, and are now trending down steadily as servicers are contacting borrowers, assessing their need for continued assistance and finding in many cases it is no longer needed.
It is clear that forbearance programs and the expanded modification waterfall, including the new payment deferral option, are working, easing the path for borrowers through this economic turmoil. As we've mentioned, the housing market has been incredibly resilient through this period, with limited inventory, bidding wars, and naturally falling, increasing house prices in almost every market in the country. Low mortgage rates, limited inventory after years of underbuilding, and increased demand for more living space and or an otherwise improved housing situation have led to a robust housing environment, with most forecasters expecting continued healthy increases in house prices. Even a market like Las Vegas, where one would have expected that the impact of the travel and leisure industry to have had the greatest impact, is demonstrating strong demand, low supply, and record low inventory, leading to house price appreciation. These simple illustrations show why borrower equity matters.
With even modest levels of amortization and house price appreciation, both leading to increased equity, A borrower's equity can quickly rise above the transaction cost of selling a house, and thereby satisfy the mortgage through a voluntary sale of the property. Even with more limited equity increases, severity can be reduced, especially when combined with alternative liquidation options like short sales. Borrowers don't often walk away when they have equity in their home. Equity gives them options. In the case of the payment deferral programs, they can, in effect, tap into equity to bridge them through a temporary loss or reduction in income.
If they are in a situation where their loss or reduction in income is more permanent, with equity, they can sell and repay the mortgage in full. Positive equity reduces both loss frequency and loss severity. While history may never repeat, it sometimes rhymes. And if we look for a time in the recent past where we saw a similar situation to today, we find the .comrecession, where despite a large increase in unemployment, house prices continued to rise and delinquency rates declined over that period. That period was characterized by many of the same factors at play today: Responsible lending leading into the recession, low overall credit risk in the market, declining mortgage rates leading to increased affordability, and balanced supply and demand, all leading to an increase in house prices and a commensurate decline in delinquencies.
With growing equity, even borrowers of lost income found a way to satisfy their mortgage obligations. In conclusion, we entered this period with a strong portfolio, and it has grown even stronger through high NIW volumes with exceptional credit characteristics. While defaults have been elevated due to the COVID related forbearances, we do not believe that this will be a significant claims event. The forbearance and foreclosure moratoriums have provided significant time for borrowers to find their footing and cure defaults by availing themselves of newly created programs. We are already seeing these positive trends.
And as long as economic disruption continues, we believe these support programs will be extended. Our insured portfolio has significant equity buildup through both amortization and house price appreciation, and that home price appreciation is expected to continue, mitigating both the frequency and severity of our expected ultimate default experience. And finally, we have extensive reinsurance in place. In summary, we are performing well through this stress and expect strong credit performance going forward, because of the strength of our long standing risk management structures and the actions we took early on to address the COVID pandemic. I now turn over to Adam, who will walk through our financial review.
Thanks, Rob, and good morning, everyone. I'll begin on slide 64, and over the next several pages, we'll share a perspective about our financial profile and capital position, and importantly, our resiliency through the COVID stress environment and our expectation for performance once the path of the virus is more contained and its economic impact more muted. Getting into the detail on page 65. Prior to the onset of the COVID pandemic, we were in a sweet spot, delivering a unique combination of high growth and high returns, with low volatility and a clear line of sight on our opportunity for continued outperformance. Our financials were fueled by exceptionally strong operating results, growing our customer franchise, scaling our NIW volume, and building the highest quality, fastest growing and short portfolio in the market.
And while COVID has impacted our most recent performance, our balance sheet is stronger than ever, the credit performance of our in force portfolio is encouraging, and we are writing a record volume and value of new business. Altogether, our earnings and financial position have proven to be remarkably resilient through this stress cycle. Turning to page 66. COVID is impacting our financial performance in a multitude of ways, some good and some introducing strain. I believe the good are well understood at this point, skyrocketing purchase demand driving a record volume and value of new business, the resiliency of the housing market supporting encouraging credit performance, and expense savings tied to a more limited travel and entertainment footprint.
Here, in the interest of transparency and in order to share what we're focused on as a management team, I'll catalog negative. Most obvious, COVID is driving an increase in our default experience and claims expense as borrowers have faced increased challenges and chosen to access forbearance and other assistance programs. COVID has also prompted the Fed to lower its reserve rate to near zero and caused a precipitous drop in interest and mortgage note rates, which has contributed to accelerating turnover in our in force portfolio and impacted our premium revenue, weighed on our investment yield, and driven an incremental amount of expenses related to a temporary increase in the pace of our DAC amortization. Our capital needs have also increased for offensive purposes to support our record NIW production, and our costs for the incremental debt, equity, ILN, and quota share capacity that we have secured are higher than they otherwise would have been had COVID not developed. Tallying all of the areas where COVID has touched our financials is particularly important because in isolating each point of impact, we can also consider how long lasting the stress might be and what our opportunity will look like once COVID has cleared.
We've noted this here with a question and a check mark. Are each of these costs temporary? Will they clear once the COVID pandemic itself clears? The answer is yes for all. These are all costs that we have been able to readily absorb in 2020 and that will begin to clear once the pandemic abates, providing a clear path for us to once again achieve strong earnings growth and returns.
Turning to slide 67. You can see the resiliency of our financial results distilled in our earnings and return profile. We are continuing to perform at a high level through stress. We would, of course, rather be achieving the exceptionally strong growth, profitability, and returns that were our hallmark prior to the onset of COVID, but we're proud of our ability to so easily absorb an unprecedented level of macro stress and still deliver strong profitability and double digit returns on equity. We have said all along that we built our business and our risk management framework to allow us to outperform across all market cycles, and our resiliency over the last eight months highlights the value of our disciplined long term approach.
Moving to slide 68. While much of our resiliency traces to the operating, funding, risk strategies that we actioned long before the onset of the pandemic, this has not been a quiet time. We've worked hard as a company to navigate through this stress. This is the time for us to replenish our insured portfolio with record volume and value of new business production and drive primary insurance in force growth despite the accelerated rate of refinancing activity. This is also the time for us to further protect our balance sheet and dramatically expand our funding runway to support our customers and their borrowers when they need us most.
And this is the time for us to search for incremental efficiency and best position our footprint for the stress that prevails. We have and will continue to do all of these things. And this positions us to look forward with confidence at the tremendous opportunity that we have to continue serving our market, continue fostering a constructive, collaborative, and inclusive environment for our employees, and to continue delivering long term financial outperformance and value for our shareholders. Turning to slide 69. The new business environment is exceptionally strong.
For all of the reasons that Brad, Claudia, Norm, and Rob have outlined today, purchase origination demand is at a high, driven by the practical need and emotional pull of homeownership in the midst of the pandemic. And mortgage insurance NIW volume is at a record level, with an increasing number of well qualified borrowers turning to MI to access the housing market. We wrote 55,000,000,000 of new business over the last twelve months, including a record 18,500,000,000.0 in the third quarter alone. We are now into the fourth quarter with a ring start and an equally robust forward pipeline. And as we've highlighted already, it's not just record volume, but record value of new business as well.
Pricing on our new production is up, reflecting the immediate and decisive changes we made at the outset of the pandemic. The credit quality of our NIW volume is the best it's ever been, which holds real positive implications for our future claims performance on this portion of our book. As credit quality moves higher, our PMIERs risk based environment moves lower, And higher pricing, higher quality, and declining capital per unit of volume means that our economics and risk adjusted returns on new production have increased. Finally, the stickiness of this business. The weighted average note rate on our production since April 1 is 3.16%.
This should be some of the most persistent volume we have ever written, staying on our books and favorably seeding our financial performance for years to come. All in, we're comfortably absorbing the accelerated runoff of our pre COVID book and more in replenishing our portfolio, building additional embedded value in our in force book along the way. Flipping forward to slide 70. Capital is critical for us. We're a balance sheet intensive insurer making long term commitments to our counterparties under a broad umbrella of regulatory and rating agency oversight.
So we focus on our balance sheet every day, aiming to be conservative across all measures, maintain a cushion at all times. We came into COVID in a position of foundational strength with a modest amount of debt leverage, a robust liquidity profile, a high quality fixed income portfolio, significant PMIERs funding runway, and broad protection from our comprehensive reinsurance program. Turning to slide 71. You can see all the work that we've done over the last eight months to build on this foundation of strength, dramatically enhancing our funding capacity and extending our reinsurance program to cover nearly all the risk we have ever written. We completed a comprehensive series of capital and reinsurance transactions over the last several months, raising 230,000,000 of common equity, 400,000,000 of senior debt, 564,000,000 in two ILN offerings, upsizing and extending our revolving credit facility to 110,000,000, and securing a new quota share reinsurance agreement.
All in, we raised nearly 1 and a half billion dollars across six transactions. Our ability to raise so much capital in such a short period of time across so many markets is noteworthy, not just because of the funding runway that it provides, but also because of the support and durability that it implies. It's a direct third party validation of our strategy, our engagement in the market, and our future opportunity. I like to say that investors don't want to buy problems. They want to buy opportunities, and they bought a big opportunity with National MI and one that we haven't wasted any time pursuing.
We've immediately put the incremental capital to work, supporting our record NIW volume. Over time, we expect these will be accretive deals, with the return on new business they're supporting coming in meaningfully in excess of their cost of capital. We're now looking forward and expect to continue to be active in the markets as we progress into 2021. In the near term, we'll look to renew our quota share reinsurance treaty and expect, if volume holds, that we will pursue two additional ILN offerings next year. Turning to slide 72.
Our balance sheet, like all balance sheets, has three components, assets, liabilities, and equity. And if you'll indulge me for presentation purposes, I'd like to bucket all of our capital activity under the equity heading, even though obviously debt, ILN, and reinsurance don't cleanly align, so that I can now move to talk about what we've done on the asset side in our investment portfolio and on the liability side with our loss reserves. At quarter end, we had total cash and investments of $1,900,000,000 Our investment strategy has always prioritized capital preservation alongside income generation, and our portfolio composition reflects this philosophy. Our portfolio is 100% fixed income, 100% investment grade, and highly diversified by issuer, sector, and asset type. We have limited exposure to any individual issuer, sector, or asset class in a broadly defined group of COVID nineteen risk categories.
While our portfolio is well situated from a risk standpoint, our investment yield has been under pressure given the record low rate environment, falling from 2.9 in the 2019 to 2.3% in the third quarter this year. Looking ahead, we would like to find pockets of incremental yield, but we'll be highly cautious in our approach. And importantly, even though our investment yield has declined, we expect our investment income will grow and investment contribution to return on equity will rebound as our asset leverage expands. Moving to slide 73 and on to the liability side of our balance sheet, specifically our loss reserves. Rob walked through the details and development of our default population.
I'll pair that here with a perspective on our reserves. Overall, we're greatly encouraged by the credit performance of our portfolio thus far, 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. The best in class quality of our insured portfolio coming into COVID, the resiliency of the housing market thus far, and the direct borrower assistance offered by the FHFA and GSEs should all serve to minimize the progression of defaults into claims. While this favorable outcome is a real possibility, and perhaps more likely every day that we see additional cure activity coming through, watch the macro environment steadily repair itself, and read headlines about medical advancements that give hope, we have taken what we believe to be an appropriately conservative posture towards our reserve setting. Turning to slide 74.
Much of the focus in the current environment is understandably on the credit performance of our pre COVID borrowers, those who account for nearly all of our default population today. But every day that we're writing record new business volume and our in force portfolio of pre COVID loans continues to run off at an accelerated pace, we're effectively rebalancing our book. Our insured portfolio is getting younger and shifting even higher in its quality. Post COVID, our aggregate loss experience will be driven much more by the performance of the business that we're putting on the books today than it will be by the business we put on in 2019 and earlier, simply by virtue of our policy counts. 2020 production and beyond will very quickly form a significant majority of our portfolio, and this augurs well for our long term credit performance.
The NIW volume that we're generating today is the highest quality business we've ever written. These are borrowers and loans that are being originated in the most stringent underwriting environment possible. They're far more rigorous than ever before. This is also business that is equitizing quickly, moving our risk further out of the money given the strength of the house price appreciation path nationwide. And it is serving as a fountain of youth of sorts, bringing down the average age of our overall portfolio, which is consequential because under normal times, the peak loss incurrence period for a mortgage is three to six years after origination.
Staying young keeps our aggregate portfolio away from this peak default and loss incurrence period. We can already begin to to measure the performance of this new business. We wrote over 108,000 policies between April 1 and October 31, and only 276 are in default. Altogether, we have reason to be optimistic about our long term credit performance. Shifting to slide 75, on to operating expenses.
Discipline, efficiency, and the scalability of our platform have always been a primary focus, and that is even more the case amidst the pandemic. We had 261 employees and incurred 125,000,000 of adjusted operating expenses during the last twelve months ended September 30, by far the smallest headcount and expense base in the mortgage insurance industry. We have real operating leverage in our platform and have achieved consistent year on year gains in our expense ratio. Going forward, we expect to achieve meaningful lifetime savings totaling approximately 100,000,000 from our IT agreement with TCS, and we expect lasting changes to our operating profile due to COVID in terms of our travel and entertainment needs and the flexibility we have for a more distributed workforce that will help drive additional efficiencies. Offsetting the positives in 2020, and we expect to a degree in 2021, is the dynamic tied to COVID where our premium revenue is somewhat pressured by the pace of turnover in our portfolio, and that very same runoff has us accelerating the recognition of certain DAC or deferred acquisition costs, adding incremental noncash expenses to our current period tally.
Over the long term, however, this DAC dynamic will actually be a positive contributor to our operating leverage and help improve our expense ratio. These are cash costs that we incurred in prior periods related to the origination of policies that have been deferred in accordance with GAAP standards and are being recognized over time. The cash costs that we laid out in prior periods don't grow. All that is happening is an accounting pull forward. And the flip side to that pull forward is that there will be less to recognize in future periods than we had originally anticipated.
Overall, we expect to continue realizing efficiency savings and driving expense ratio improvement over the long term. With our embedded operating leverage remaining an important component of our return profile. Turning to slide 76. I'll share a longer term perspective. Our opportunity for financial outperformance remains intact, and our goal is to effectively navigate through the COVID pandemic and position National MI to quickly rebound and deliver strong growth, profitability, and returns.
I like this view, a decomposition of our ROE profile. It helps us take stock of the different pieces that drive our bottom line and returns and trace how our operating decisions work their way through to our financial performance. Most importantly, we can see how readily achievable our goals are once the impact of the pandemic clears. We are poised to continue delivering on our strong mid teens return target over the long term. Moving to slide 77.
We continue to deliver financial success. The strong balance sheet and resilient earnings performance through the unprecedented stress of the COVID pandemic. We took decisive action from an operating, from a pricing, from a risk, and from a capital standpoint. And the strength of our franchise coming in COVID and speed with which we were able to execute once the pandemic developed have allowed us to remain as nimble as ever as a financial matter with our customers and fully support them with record NIW volume. There's a lot of opportunity that has come on the heels of the pandemic, a lasting set of tailwinds in terms of new business volume and value, a validation of our unique credit risk management approach, an increasingly technology focused customer base that has an enhanced appreciation for our IT leadership, and changes that have increased the efficiency of our operating footprint.
While these have been balanced by the introduction of certain costs, we expect the cost will clear when the virus abates while the upside momentum will remain. This gives me confidence about our financial prospects going forward and ability to deliver attractive risk adjusted returns for our shareholders. Thank you for your time today and continued interest in National MI. With that, I'll turn it to Brad for closing remarks.
Thanks, Adam. I'll pick up on slide 78. We are excited about the opportunity ahead of us. National MI has a proven track record of growth, credit quality, and financial returns, delivering significant value for our shareholders. As we navigate the post COVID environment, we will continue to leverage our proven strategy to expand our customer engagement and market presence while writing new business and growing in a risk responsible manner.
We have a clear opportunity to continue doing what we do best and grow meaningfully in what is shaping up to be the best MI market opportunity. Altogether, we have every expectation that we will continue to build significant value and expand our franchise for our employees, our customers and their borrowers, and our shareholders. With that, we'll shift to our Q and A session. Before the Q and A session, Bill Leatherberry, our General Counsel Pat Mathis, our Chief Operating Officer, will join Claudia, Norm, Rob, Adam, and me on the screen. And John Swenson will help moderate as we go through the questions you have been submitting online through the course of our presentation.
Operator, please add the rest of our group to the screen so we can begin.
Okay, great. I see that we have the group online. We have a little bit over 30 questions. So we'll try to get to them all in the time we have. Brad, our first question comes from Phil Stefano of Deutsche Bank.
His question is, the target of mid teens returns has been vocalized in the sector with reinsurance, particularly ILNs, removing the tail risk and volatility, do you still need a mid teens return? Does something like a spread against the risk free rate make more sense?
Well, thank you, John, and thanks, Phil. I think I'll turn that question over to Adam.
Great. It's a great question, Phil. We firmly believe that our pricing approach and our targeted returns remain appropriate for our business over the long term. Most importantly, the way we price business and engage provides every qualified borrower the ability to access a home. There's not a single borrower today who's not been able to secure their mortgage because of the cost of MI coverage.
Our approach is first and foremost to support those borrowers. The targeted returns of mid teens are important because in many respects the way we approach the market on the primary side, the discipline and what that means from a return standpoint directly inform and contribute to our ability to access on a continued basis those reinsurance markets that have been so valuable to insulate our business from tail events. Responsible pricing and targeted returns feed directly into the economic profile that our quota share reinsurance partners are able to achieve by participating alongside of us on a proportional basis. That same discipline, risk responsibility, and focus on economic outcomes prevails when we talk to ILN investors. We fully expect to continue to target those strong mid teens returns and along the way bolster our ability to deliver that outcome through different cycles by continuing to execute in the reinsurance markets.
Okay, terrific. Our next question comes from Doug Harter of Credit Suisse. Can you talk about the factors that led to the slowdown in IF growth at the onset of COVID?
Yes, thanks. Thanks, Doug. I think we'll hear from Claudia on that question.
Yeah, thank you. Yeah, so the low rates that are fueling the new business opportunity is significant, but those low rates are also driving refinances. And so the key driver in the slowdown of IF is runoff. The good news is the new business environment is just so exceptionally strong, and it's well priced, high quality, and it should prove to be really highly persistent. And that's key because this will seed our future growth and our financial results.
And it's really helping to build significant incremental embedded value in our portfolio, even though we have the runoff.
Great. We have a follow-up from Doug. How has pricing trended since the increase in pricing at the onset of COVID?
Sure.
Yeah, so you know, deb overall the pricing environment remains constructive. You know price is up Risk is down and the capital that we need to pull for new businesses down So unit economics are up. As you know, we were early to raise rates. It's always been our posture to be more conservative, and it certainly was our posture in the face of an unprecedented stress event. And the other RMIs then eventually followed suit.
So what we've seen in pricing is it's up for risk on an apples to apples basis, but the risk itself is down significantly. So the rate that we're achieving on NIW volume post COVID is higher, but it's somewhat tempered because of the fact that the risk is also down so dramatically.
Great. A reminder to the audience, you can submit questions through the chat window on your screen. We'll continue to aggregate those and deliver them to the extent we have time. Your next question comes from Mark Dwelle of RBC. Question His is, why would a lender have a master policy but not activate it?
What are the main reasons why you've not already obtained master policies with those where you don't have them yet?
Okay, I think we'll pass that over to Norm to hear his thoughts.
Thanks Brad. You know, there's a number of reasons. Some of them, the most challenging ones, are system driven, especially in the top 200 accounts. Getting the master policy doesn't require that you're integrated within their system. That's generally the biggest challenging hurdle that we have with our with our largest accounts.
Working through those, like I said in in my piece, allows us the ability then to be turned on within their system and then start generating business. I'd say that's the biggest obstacle.
Thanks, Norm. We have a question from Bose George of KBW. Several questions and Bose will attack the first couple of those and then come back to them after we hear from some others. Bose's question, Brad, you've done a great job of growing market share over time, but it looks like your NIW market share has remained roughly in the same range now for a couple of years in that 10% range. Can you talk about market share trends and whether you think that over time your share will trend up toward a pro rata share of the market?
Well, thank you for that question, Bose, and I think we'll pass that over to Claudia.
Yeah, thanks, you know, as you know, it's not how we manage our business, but, we feel really good about where we're at. As you know, we had we did 18 and a half billion dollars of niw in in q3, which which was significant and and and as you know, the most attractive business that we'll write, you know, market share is going to fluctuate. I think we we we did around almost 12% market share in 2019, but market share is
going to
fluctuate. You know, for us too, we were one of the first to raise rates. So it does take some time for things to normalize given the pipeline dynamic. You know, there are ninety day honors of those rates, so it does take a while to normalize. But overall, you know, we're we're building a a very strong long term durable business, and we're delivering resilient performance and leadership.
So we're very, very encouraged by our results.
Thanks, Claudia. After follow-up from Bose. After 3Q earnings, there was some discussion about price competition, especially in the so called bulk market. Can you update us on competitive trends in that area of the market?
Yeah, in that area, I really can't comment. You know, we don't participate in the bulk pricing. So I can't speculate, as we don't participate. Our focus has always been on rate GPS and risk adjusted returns. So it's just not a market that we are in, that we're looking at, at this point.
Our next question comes from Mark DeBries of Barclays. It sounds like you expect permanent benefits to your expenses from reduced travel and a more distributed workforce. Could you quantify what that means for the expense ratio as you continue to grow your book?
Thank you for that question, Mark, and I think we'll pass that one over to Adam.
Great. We do expect long term expense benefits from changes in customer engagement and what that means for our T and E needs, as well as from the prospect of an increasingly distributed workforce. We can't quantify that for you in terms of dollars. It's still unfolding now. We need to see the path that the virus takes and where things ultimately land when the environment clears.
But long term, we expect that our expense ratio will continue to trend down, providing us with operating leverage and land in the twenties, probably around the mid 20s, which will really help provide additional support for our long term return potential.
We have a follow-up from Mark DeBries, sort of in the expense area. Could you provide some perspective on how much of the origination process has been digitized? How much further that can go? The pace at which this may continue, and the implications of that process for the business.
So Claudia, why don't you start that and then just pass it off to the extent you want to drill down further.
Sure. You know, and I can we can pass it on to whomever at that point. But I think I think one of the things that we think about in this in this highly digitized world, is we have always, looked at efficiencies in all aspects of the organization. It's just been paramount for us. You know, as it relates to, you know, sales process and just the the, how we structure around it, we continue to organize around the customer and whatever is the best way to service them and certainly in this changing environment.
You know, when we think about the digitization and and how this continues to morph, what our priority is, we're always assessing the best way to service our lenders and their borrowers, and we'll continue to do that in this in this world as well. You know, one of the things that we looked at with this presentation is just how quickly things are changing and how quickly we're adapting to those changes. So we're always assess assessing this. But again, driving efficiency throughout our company has been a significant initiative for us, and it's really part of our culture.
Great. We have a follow-up from Phil Stefano. Does technology and COVID drive a realization or rationalization of the number of people needed in the sales force, as the sales process changed for the long run, that there could be material expense benefits?
Claudia, why don't you take that one?
Sure. I mean, similar answer to, you know, just efficiency overall. We are definitely organizing around the customer differently. You know, to be a salesperson today in this environment, you have to customer, know their technology, not only ours. So you organize around them.
And and whether whether in the long run that has any type of, of material realization of of number of people. It may look differently. But that's, you know, it's still early on, but we are very quick to adapt, to whatever the most efficient way is to organize around the customer. And and certainly efficiency means, what's the best way to, what's our expense structure around that. So we'll continue to look at that, and we'll continue to drive what is best for the customer and what's the best for National MI.
One thing to that. We restricted travel 100% back in March. But come June, we eliminated that travel restriction and made it subject to, you know, state and local restrictions. And so our team has had the availability to go out and travel since June. What we found is most of our customers have not gone back to the office or opened up, so there really are much fewer call points.
And a lot of them are talking about that being the case next year. And the other part is, like I mentioned before, the decision point, because of technology, is going back closer and closer to a more centralized type of a model. So I think both of those types of things are going to have a positive impact for the way that we work and a streamlined effect going forward.
Thanks, Gordon and Claudia. We have a question from Jeff Dunn of Dowling and Partners. With the ability to extend the forbearance period for up to twelve months, why are there already some borrowers entering modifications or needing liquidation options?
I think Rob Smith, you addressed some of those changes to forbearance in your presentation. Why don't you take that question?
Sure. Yeah, so I think what a lot of the servicers want to do is they want to get people out of forbearance, and, you know, they have been contacting borrowers, in some cases, borrowers have decided that they just are in an untenable situation, as I've mentioned, not many of them, but you're always gonna have a few who throw in the towel, if you will, and then the servicer tries to ease them out of the situation. In some cases, you know, it's kind of a They may have what seems to be a more permanent loss of income or reduction income, in which case they need a flex mod, or they may be so dire that they just need to sell, and again, they're short sell options. But in any case, it's really a function of the servicers trying to work through the pipeline. Borrowers are allowed to continue forbearance, as you mentioned, and many do, but in all those cases that you saw, the few cases that we've seen, it's the borrowers making the decision that they don't want to continue.
Great, thanks Rob. We have another follow-up from Doug Harter of Credit Suisse. How does the change to a pricing engine change the role of a salesperson?
Claudia, why don't you kick that off and pass it along if you want to provide more detail from the team.
Yeah. I'll start and Norm can, add, his thoughts. You know, a salesperson today needs to really understand the lender's complete process so that we can connect with those lenders with the pricing engine. So understanding the salesperson, really understanding technology, understanding the digitalization world around connecting with the pricing engines, training the lenders to be able to look at those engines and understand it, is really the key today with how things have changed and morph for the salesperson's role. Norm, if you have any other thoughts there, as well.
Yeah. Actually, I think it's a real positive advantage for us because one of the a lot of the time that we spent when we first came out was just really trying to introduce ourselves to the market and be seen. You can't get chosen if they can't see you. The advent and the ability for us to be seen immediately within these systems cuts down a lot of that time. So for us, it's a it's a definite advantage.
And it does go back to what I had said before, which is it helps us work through old habits and legacy advantages. It really evens the playing field for everybody.
Great. A follow-up from Bose George. Can you provide an update on trends in the more competitive trends in the market? The recent FHA annual report showed growing capital levels there. Do you think an FHA premium cut is likely?
Claudia, you want to start there?
Yeah. I'll I basically I think that, I don't have any comments around, you know, the fha and any kind of pricing cuts. So, But you know the the meaningful difference in credit quality just to comment around that, given our high high quality I mean, I think there's a real purpose of the fha and And but it will always be our responsibility to have very very high risk I mean, low risk loans because you know, we're the private sector I think at the end of the day fhfa is a it takes a role on for affordable lending that makes a lot of sense. And, but I can't really comment on any, you know, any pricing changes there, specifically
This might help clarify Bose's question. He says, given the meaningful difference in credit quality at the MIs versus the FHA, and especially given our very high credit quality, how meaningful do we think a 25 basis point FHA premium cut would be for the MIs in general and to you in particular?
Adam, you want to take that one?
Sure. And maybe just to double back, I think it was a two part question. One, touching on the competitive environment and then two, the prospect and impact of an FHA rate cut. From a competitive standpoint, we are seeing a really constructive environment still. There's a lot of discipline that prevails.
We've noted the chatter obviously around bulk bids on the heels of third quarter results, but none of that is coming through to where we focus and none of that is impacting our business. Certainly, think the environment is one that merits continued discipline from a pricing standpoint. While a lot of the macro environment is proving to be resilient, there's a far greater potential for volatile outcomes going forward than there was prior to the onset of COVID. And when we price, we price to cover all possible paths forward as opposed to just a base case. So our view is the pricing increases that we took following COVID are still necessary.
And we obviously don't know what's happening with many of our competitors in terms of their strategy and their decisions, but we can see their behavior. And that behavior would seem to indicate a generally consistent view that the pricing the price increases that the industry achieved were both necessary, and and are proving to be sustainable at this point. From an FHA standpoint, obviously, there was, increased discussion. I I would note that the levels of capitalization that the FHA reported in their most recent, actuarial report were generally consistent with the levels of capitalization that they had reported prior to the onset of the two thousand eight financial crisis. And that was an event where their capital proved to be severely was severely depleted and proved to be just too little.
So we'll have to see. We'll have to see what what the tone in Washington is around around changes. We think that just because there are additional dollars in the system doesn't mean that they should automatically translate to a rate cut. The capital that's in the system is there to provide a buffer, not to subsidize underpricing. The impact of a 25 basis point rate cut by the FHA on MI industry volume, We don't think will be significant.
We think there are really is every opportunity, particularly if you think about the profile of the borrower who's coming through now. A 25 basis point rate cut for the FHA, that's gonna help the fringe borrower that isn't coming into our market anyway today. There's a wider gulf between the borrowers that we are supporting and the borrowers that are accessing the FHA market today than ever before just by virtue of the credit quality that's coming through in the system. So as to whether or not it's gonna happen, we obviously need to watch. It's something that we're focused on.
We think there's a lot of reasons why it shouldn't necessarily be passed through, but time will tell. And as to impact, if it does come through, we don't think that it will meaningfully shift volume from the private market to the public market.
Our next question comes from Bill Dezellem of Teton Capital. We now have over 1,200 or roughly 1,200 active lender relationships. How many total should we think about as a possibility? And also asking about possible color on market penetration and potential for further meaningful penetration and implications that could have on future growth?
Thank you for that question, Phil. Let's hear from Norm.
Yeah, thanks Brad. You know, it's a good question and I think that's really what the top 600 large account focus has been on. If you look at our account growth year over year, we generally have been able to activate somewhere around 100 accounts a year or so. So focusing on what we have, three ninety five of them are already active. 81 of them have a master policy in place, kind of with that question before.
If we focus just on that 81, that's $40,000,000,000 more of additional NIW that we can fight for in 2021. And really, that's going to be our main focus. There are 124 others. I guess the best answer I could say is any master policy is difficult to get, no matter where they fall in on the COMPASS report. So you put your efforts and your your energies where you're going to get the biggest bang for your buck.
And that's really for us the what you see in the 01/2481 that we referenced before.
Our next question is a follow-up from Jeff Dunn of Dowling. Can you elaborate on the TCS initiative? In which areas do you expect to realize the most expense savings and how can these savings materialize over the period you've cited?
Thanks for that, Jeff. Adam, can you address that?
Sure. Jeff, it's a good question. Our largest costs at National MI, broadly speaking, are people in our systems. And the TCS initiative touches on both of those. We achieve meaningful, savings on the people side.
A large majority of our IT department has been rebadged as TCS employees, and that will impact our payroll costs going forward in a meaningful and positive way. And from a system standpoint, we believe with TCS working alongside of us and based on the structure of our contract that we will be able to achieve, better, faster, and more certain outcomes from an IT system standpoint at lower expense. It's just efficiency in its truest sense. The savings will emerge on a cash basis actually in real time. It's a seven year agreement that we have with them that, already is beginning to yield significant savings from a cash standpoint.
The gap expense dynamic for, that that contract, shifts those cash savings, which are already materializing today, to a little bit more of a back end emergence from a gap expense standpoint. So it's real. It's certain. It's contractual. We're seeing it already from a people in a system standpoint, and the gap emergence pattern will will take a little bit of time to unfold over the next few years.
Thank you, Adam. We have a follow-up question from Doug Harter of Credit Suisse. What was the progress over the past year among the top 600 lenders?
Thanks, Let's hear from Norm on that one.
Yeah. Over the course of I think we had 23 accounts in the top 600 that we activated. If you get more specific, there were two of the top 15 that we activated even within the last couple of months. So I think we've made significant progress this year in that group and will continue to.
Great. Thanks, Norm. Our next question comes from Phil Stefano of Deutsche Bank. What can you tell us about expectations for credit next year? As the virus and lockdowns return and forbearance options come to a close, what could this mean?
How should we think about credit in 2021?
Thanks for that question, Phil. Let's hear Rob's thoughts on that question.
Sure. Thank you, Phil, the question. We still see the credit environment being incredibly positive. We expect a lot of the programs that were put in place at the onset of the COVID pandemic will be continued and extended. You know, again, no one really wants to force borrowers who were put into a bad situation, really through no fault of their own, to be forced out of their home.
And, you know, these accommodations, as we're showing, are really working. So, you know, I don't think anyone's in a hurry to end something that's working quite well. In terms of new originations, you know, again, you know, we mentioned the market's going to be well over 500,000,000,000 this year, private MI market. And think about that in, that's in an environment where 97 LTVs below $6.80 are not really being originated. They've been kind of eliminated from the credit box.
97 LTVs with DTIs over 45 are largely gone. Final combination, you know, over 45 DTIs below six eighty are largely gone. And despite that, we're still originating over 500,000,000,000 this year as an industry. There are plenty of qualified borrowers out there. Their problem is finding a house, quite frankly.
That situation is not going resolve anytime soon, the lack of supply. So we just see the credit environment as being incredibly positive. We're getting really well qualified borrowers into our market. And, you know, there seems to be plenty of them. As Brad and others have mentioned, the demand is really there for housing.
So as long as that demand from high quality borrowers continues, we expect the credit environment's gonna be really, really good.
There's a follow-up to that. What is our perspective on the likelihood that forbearance is extended as we get out into next year?
Thanks for that. Rob, please continue on that topic.
Sure, again, you know, if it's not broken, don't fix it. I think that's the philosophy that policymakers take. And also remember too, you know, it doesn't cost the federal government any money to implement forbearance, so, you know, it's a good policy choice as well, from that perspective. But again, you know, it's worked, you know, it really has worked. We're seeing borrowers get through this temporary hardship and come out the other side in increasing numbers.
You know, I think if this was a situation like the great recession where people get in over their heads and weren't qualified and really unsustainable situations to begin with, it may be different. But, these borrowers who are going into forbearance are very well qualified going into this. The products are fixed rate amortizing mortgages, where every payment you're building equity. And again, we're in housing environment, which is short supply and people are building equity through aspirate depreciation as well. So, the forbearance programs and then the options on the other end, you know, the payment deferral give them the ability effectively to tap into their equity free of charge if they need to.
So again, these are good programs and they really work. Know, early intervention, like in other areas of the economy, early intervention really works. And we don't see them being cut short while we still have this turmoil. Thanks, Rob. We have
a question from Alexander Clipper, an individual investor. Given the strength of the purchase market, but also acknowledging the pace of refinancing, how do we think about persistency going forward and the implications that could have on growth rate of insurance in force?
Thanks, Alexander, for that. Let's hear from Adam on that topic.
Sure. In thinking about persistency going forward and what the actual number will be, we report persistency every quarter, and it's a twelve month persistency. It's important to understand the calculation itself. The persistency, the 60% or so persistency that we reported as of September 30 is the percentage of the business that was on our books at 09/30/2019, twelve months earlier, that remained on our books as of 09/30/2020, twelve months later. That persistency number will likely continue to trend down to a degree as we bring in additional the fourth quarter of twenty nineteen, the first quarter of twenty twenty, additional business that has higher embedded note rates and is more ripe for refinancing and turnover activity.
But then it will very quickly, persistency will very quickly rebound as we roll forward on a calendar basis, and the business that we've originated since the onset of COVID after April 1 starts to come into the calculus. It takes twelve months for the business that we originate to come into the calculation because it's a twelve month look back. When that happens, our persistency should increase dramatically, not at a slow and gradual pace. Over the long term, the scale, the volume of the business that we're writing today, 55,000,000,000 of volume over the last twelve months, and a really robust and positive outlook for the volume environment going forward, along with the record low note rates, the mortgage rates that underpin that production that will cause it to be really sticky and highly persistent. Both of those factors will drive significant growth in our insured portfolio going forward.
Right now, we're in the heart of the storm, so to speak, from a runoff standpoint, where it's not just the pace of runoff, but it's the size of the runoff as dollar matter because that portion of our portfolio was still quite large. As we roll forward, even if the pace of runoff of that pre COVID portfolio stays accelerated, the dollar consequence will come down meaningfully. If we had a $100 in a bank account and we took out 50% of it, we'd take out $50. If we then continue to take out 50% thereafter, we're only taking out $25 from the calculus. And that balance will very quickly lead to an increase in our persistency rate, as well as strong growth in the dollars of the insured portfolio.
Thanks Adam. Our next question comes from Aaron Saganovich of Citi. If we are underwriting today's NIW at mid teens, but it's stronger overall credit quality, as credit normalizes, is it possible that these policies could end up being higher than the mid teens returns? Or is reinsurance costs limiting the potential upside there in favor of less downside?
Basically a return question, so we'll turn that one over to Adam.
Great. Thanks, Brad. It's a great question. Obviously, we are pricing our business and we're talking about expected returns, they're just that, they're expectations. They're informed by not just pricing, but expense loading, expectations for future claims performance, capital requirements for that business, and taxes.
And that ultimately gets us to an after tax expected return. Our actual results could always be better or candidly worse than that expected return. We do note some of those factors that inform the question that the outlook for housing continues to be robust and resilient, and we've not fully considered that in our pricing framework. In much the same way that we've taken a more cautious posture to our reserving, specifically with respect to a house price forecast. We've taken the same cautious approach from a a pricing standpoint.
And that's necessary in this environment because pricing has to carry us over the long term. We don't have the ability to reprice our policies after a year if we find out that some of those underlying assumptions prove to be inadequate. So we have to embed conservatism. As to whether or not the opportunity for upside out performance is more limited because of reinsurance, it isn't. Reinsurance is effectively a fixed cost, particularly the ILNs.
It's a cost certain at the time that we execute the transaction. It doesn't fluctuate. And so any outperformance, on that net, portion of our business that we've retained really accrues to our benefit. The same dynamic holds through in our in our quota share agreements because there's a significant profit commission, where even though we are sharing or seeding a significant portion of the loss exposure that we we have, we're retaining a significant majority of the upside from a profit standpoint.
We have a question from Gary Gordon, an individual investor. Given our post close underwriting program, what exactly does that allow us to do? What advantages does it give us? And can we ultimately put back loans or rescind coverage as a result of that post close review?
Let's hear from Rob to start on that one, and Rob, if you want to pass it off for more detail to anybody else, just feel free to do so.
Sure, thank you. Yeah, that's part of the purpose of the post close review process. We do rescind loans that we find defects through the post close review. As I mentioned, you know, a lot of those defects have the loan gone delinquent and eventually the claim may have been found anyway without the post close review process. One of the advantages is we find them early.
Often when you find a defect early, it can be corrected by an originator. You know, sometimes it's missing documentation. They, you know, with the threat of a rescission, they can find their documentation, it's fresh, you know, the origination is fresh. If it can't be corrected, they can perhaps refinance the loan and do things right on the refinance. Or they could certainly sell the loan through a scratch and dent program as well.
So it's great value to us, we can catch things early. Again, if we do catch things early and we see patterns, we can inform our customers that we're seeing and help them take corrective action. So yeah, absolutely. It's a program we really enjoy having. It's really enabled by our system, our platform, the ability to ingest a lot of documents easily and review them quite easily.
And it does provide us with those protections that we can scrub out loans that haven't been manufactured well.
And if I could just add a few comments around that post close review process. When we built the company, we really wanted restore faith in mortgage insurance. And so one of the ways we wanted to do that was the delegated lenders that we approved on a delegated basis. We would look at that. We'd validate the loans post close, and that would also provide a benefit to the lender.
They get rescission relief from that. So there's a lot of benefits for us, but there's a lot of benefits for the lender. And we also wanted to make sure that we didn't approach our servicing of those loans in a way that was a negative to the lenders. And again, that's part of bringing the trust back to the industry back in 2012. It has been a very successful program for us for both our confidence on the manufacturing of the lender.
It just validates a high quality delegated lender. And then it also provides recession relief for that lender, which is positive an added benefit as well, as we're able to check data right away and make sure that the data is correct. But overall, it's a win win value proposition for National MI.
We have a question from Bill Dezellem of Teton Capital. The question is, any signs we're seeing of refinancings slowing down?
I guess let's hear from Adam on that one in terms of whether you look at portfolio runoff, are you seeing a change in the mix there?
Sure, happy to. Maybe I'll turn it and talk about what we're seeing in our production data and what that implies about the broader refinancing market and the pace of activity and volume of activity. We're not seeing any slowdown in terms of the amount of refinancing volume coming into us as an NIW matter or coming into us as an application matter. And applications are really key here. That's our real time view.
There's obviously a natural cycle time between when a mortgage application is made and when the loan itself closes, and there's a corresponding cycle time for when an MI application is submitted until we convert it into NIW. So looking at trends in our application volume gives us that real time perspective. We're seeing the pace and the volume of refinancing applications or as opposed to purchase applications still continuing at roughly the same level it was in the third quarter through most of the third quarter. That has us, thinking as a read through that the level of refinancing activity more broadly in the market continues at the same pace. As to what it means for our portfolio runoff, we'll need to see.
We we measure runoff, at the end of each month. So we're sitting here on the November 19, and we'll take a look when we get to, to the thirtieth of the month as to what the the pace of runoff was. But, again, the consequences of that accelerated turnover to the extent to discontinuing will lessen over time as a dollar matter as more and more of that that older, higher mortgage note rate business comes off of our portfolio.
There there's a follow-up from Bill Dezellem. What was the the thinking behind the upsizing of the credit facility?
Okay. Adam?
Sure. It's it's a great question. The credit facility provides us with enormous benefits. Having a pool of undrawn capital that we could tap into on adjusted time basis and deploy for really any reason, but most importantly, to deploy support of new business production is incredibly valuable in the aggregate. The $10,000,000 of additional capacity that we secured following the close of the third quarter will cost us about $35,000 a year.
It's a 35 basis point undrawn cost for that capital. But to the extent we were to access it, it would support about a billion dollars of additional NIW volume. A billion dollars of NIW volume and a lifetime embedded value associated with that and earnings benefit more than consumes the $35,000 of annual cost. And so it was, an easy trade off for us to, to assess and something that we were, keen to, keen to to access.
We're continuing to get a lot of questions on persistency. And one came in from Doug Harter of Credit Suisse. What is our outlook for persistency looking ahead?
Adam, why don't you take that one?
Sure. Doug, on this one, I'll kind of just reiterate some of the comments from earlier during the Q and A. We do expect that the pace of turnover in the pre COVID book, the business originated through March 31, will continue at an accelerated level as long as the interest rate environment and the mortgage opportunity remains attractive for existing borrowers. It's in their interest and fully understandable why they're pursuing refinancing activity. That said, the consequence for persistency directly traces to the calculation itself.
And as more and more of our portfolio is originated in the post COVID environment, with $55,000,000,000 of NIW and a large chunk of that coming after, April 1 in record low mortgage rate, at record low mortgage rates, that will be, we expect, some of the most persistent business that we've certainly ever written and that has ever been written in the MI market overall. That will have the effect of not just moderating the, the turnover that we're seeing, dramatically outweighing it. And what we expect as we roll forward is that our persistency, our reported twelve month persistency, will continue to decline modestly over the next few quarters, but then begin to ramp up dramatically as the new business originated in the post COVID environment comes into that twelve month calculation. Overall, the most important piece when we're looking at persistency is thinking about what it means for the growth in our portfolio and by extension, our premium revenue opportunity. And the growth in our portfolio will continue and actually will resume and repair itself in a meaningful way as we roll forward because of the volume opportunity that exists today and how sticky that production we expect it will be.
We have no further questions remaining in the queue, Brad. So I'll turn it back to you to wrap things up.
Well, yeah, thank you to the audience for a number of great questions there. We appreciate it and we thank you for joining us today and for your ongoing interest in National MI. As you heard throughout our time today, we are proud of the success we have delivered to date and how we have managed the company through this period of increased stress. We believe we are well positioned to continue to outperform and deliver increasing value for our shareholders. Thank you again, and we wish you a happy and healthy holiday season.