Fixed-rate Mortgage

 

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A fixed-rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float". As a result, payment amounts and the duration of the loan are fixed and the person who is responsible for paying back the loan benefits from a consistent, single payment and the ability to plan a budget based on this fixed cost.

Other forms of mortgage loans include interest only mortgage, graduated payment mortgage, variable rate mortgage (including adjustable-rate mortgages and tracker mortgages), negative amortization mortgage, and balloon payment mortgage. Unlike many other loan types, FRM interest payments and loan duration is fixed from beginning to end.

Fixed-rate mortgages are characterized by amount of loan, interest rate, compounding frequency, and duration. With these values, the monthly repayments can be calculated.

Fixed-rate mortgages are vulnerable to inflation risk, which means that borrowers with such mortgages are better off under unexpectedly high inflation (as the inflation lowers the real present value of their loan repayments), while they are worse off if there is a drop in inflation that lowers interest rates. Fixed-rate mortgages usually charge higher interest rates than those with adjustable rates. According to scholars, "borrowers should generally prefer adjustable-rate over fixed-rate mortgages, unless interest rates are low."

Usage throughout the world

The availability of fixed-rate mortgages varies between countries.

In the United States, the Federal Housing Administration (FHA) helped develop and standardize the fixed rate mortgage as an alternative to the balloon payment mortgage by insuring them and by doing so helped the mortgage design garner usage. Because of the large payment at the end of the older, balloon-payment loan, refinancing risk resulted in widespread foreclosures. The fixed-rate mortgage was the first mortgage loan that was fully amortized (fully paid at the end of the loan) precluding successive loans, and had fixed interest rates and payments. Fixed-rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high housing costs, where even a 30-year term leaves the monthly payments out of reach of the average family).

In Canada, the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years. In Denmark, fixed-rate 30-year mortgages are the standard form of home loan. A fixed rate mortgage in Singapore has the interest rate fixed for only the first three to five years of the loan, and it then becomes variable. In Australia, "honeymoon" mortgages with introductory rates are common, but can last as short as a year, and may instead offer a fixed reduction in interest rate rather than a fixed rate itself. Furthermore, they are often combined with properties of flexible mortgages to create what is known as an Australian mortgage, which often allow borrowers to overpay to reduce interest charges and then draw on these overpayments in the future.

In the UK, fixed-rate mortgage is the name given to an adjustable-rate mortgage with the interest rate locked in for the first two to five years. At the end of that time, many borrowers refinance their mortgages to lock in another stable rate for the next few years. The mortgage industry of the United Kingdom has traditionally been dominated by building societies, whose raised funds must be at least 50% deposits, so lenders prefer variable-rate mortgages to fixed-rate mortgages, to reduce asset–liability mismatch due to interest rate risk. Lenders, in turn, influence consumer decisions which already prefer lower initial monthly payments.

Comparisons

Fixed-rate mortgages are usually more expensive than adjustable rate mortgages. The inherent interest rate risk makes long-term fixed rate loans tend to have a higher interest rate than short-term loans. The relationship between interest rates for short and long-term loans is represented by the yield curve, which generally slopes upward (longer terms are more expensive). The opposite circumstance is known as an inverted yield curve and occurs less often.

The fact that a fixed-rate mortgage has a higher starting interest rate does not indicate that it is a worse type of borrowing than an adjustable-rate mortgage. If interest rates rise, the ARM will cost more, but the FRM will cost the same. In effect, the lender has agreed to take the interest rate risk on a fixed-rate loan.

Some studies have shown that the majority of borrowers with adjustable rate mortgages save money in the long term but also that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan.

Reverse Mortgage

 

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A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments. Borrowers are still responsible for property taxes or homeowner's insurance. Reverse mortgages allow older people to immediately access the equity they have built up in their homes, and defer payment of the loan until they die, sell, or move out of the home. 

Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower's estate) is generally not required to repay any additional loan balance in excess of the value of the home.

Regulators and academics have given mixed commentary on the reverse mortgage market. Some economists argue that reverse mortgages may benefit the elderly by smoothing out their income and consumption patterns over time. However, regulatory authorities, such as the Consumer Financial Protection Bureau, argue that reverse mortgages are "complex products and difficult for consumers to understand", especially in light of "misleading advertising", low-quality counseling, and "risk of fraud and other scams". 

Moreover, the Bureau claims that many consumers do not use reverse mortgages for the positive, consumption-smoothing purposes advanced by economists. In Canada, the borrower must seek independent legal advice before being approved for a reverse mortgage. In the United States, reverse mortgage borrowers, similarly to other mortgage borrowers, can face foreclosure if they do not maintain their homes or keep up to date on homeowner's insurance and property taxes.

By country

Australia

Eligibility

Reverse mortgages are available in Australia. Under the Responsible Lending Laws, the National Consumer Credit Protection Act was amended in 2012 to incorporate a high level of regulation for reverse mortgage. Reverse mortgages are also regulated by the Australian Securities and Investments Commission (ASIC) requiring high compliance and disclosure from lenders and advisers to all borrowers.

Borrowers should seek credit advice from an accredited reverse mortgage specialist before applying for a reverse mortgage. Anyone who wants to engage in credit activities (including lenders, lessors and brokers) must be licensed with ASIC or be a representative of someone who is licensed (that is, they must either have their own licence or come under the umbrella of another licensee as an authorised credit representative or employee) (ASIC)

Eligibility requirements vary by lender. To qualify for a reverse mortgage in Australia,

• the borrower must be over a certain age, usually 60 or 65; if the mortgage has more than one borrower, the youngest borrower must meet the age requirement
• the borrower must own the property, or the existing mortgage balance must be low enough that it will be extinguished by the reverse mortgage proceeds, thus leaving the reverse mortgage as the only debt that remains secured against the property.

Loan size and cost

Reverse mortgages in Australia can be as high as 50% of the property's value. The exact amount of money available (loan size) is determined by several factors:

• the borrower's age, with a higher amount available at a higher age
• current interest rates
• property value
• the property's location
• program minimum and maximum; for example, the loan might be constrained to a minimum of $10,000 and a maximum of between $250,000 and $1,000,000 depending on the lender.

The cost of getting a reverse mortgage depends on the particular reverse mortgage program the borrower acquires. These costs are frequently rolled into the loan itself and therefore compound with the principal. Typical costs for the reverse mortgage include:

• an application fee (establishment fee) = between $0 and $950
• stamp duty, mortgage registration fees, and other government charges = vary with location

The interest rate on the reverse mortgage varies. Some programs used to offer fixed rate loans, while others offer variable rate loans. Since the update of the National Consumer Credit Protection Act in September 2012, new reverse mortgage loans are not allowed to have fixed rates.

In addition, there may be costs during the life of the reverse mortgage. A monthly service charge may be applied to the balance of the loan (for example, $12 per month), which compounds with the principal. The best products have no monthly fees.

Proceeds from a reverse mortgage

The money from a reverse mortgage can be distributed in several different ways:

• as a lump sum, in cash, at settlement;
• as a Tenure payment, a monthly cash payment;
• as a line of credit, similar to a home equity line of credit;
• as a combination of these.

Taxes and insurance

The borrower remains entirely responsible for the property. This includes physical maintenance. In addition, some programs require periodic reassessments of the value of the property.

Income from a reverse mortgage set up as an annuity or as a line of credit should not affect Government Income Support entitlements. However, income from a reverse mortgage set up as a lump sum could be considered a financial investment and thus deemed under the Income Test; this category includes all sums over $40,000 and sums under $40,000 that are not spent within 90 days.

When the loan comes due

Most reverse mortgages must be repaid (including all unpaid interest and fees) when they leave the home permanently. This includes when they sell the home or die. However, most reverse mortgages are owner-occupier loans only so that the borrower is not allowed to rent the property to a long-term tenant and move out. A borrower should check this if he thinks he wants to rent his property and move somewhere else.

A common misconception is that when the borrower dies or leaves the home (e.g., goes to an aged-care facility or moves somewhere else) the house must be sold. This is not the case; the loan must be repaid. Thus, the beneficiaries of the estate may decide to repay the reverse mortgage from other sources, sale of other assets, or even refinancing to a normal mortgage or, if they qualify, another reverse mortgage.

Prepayment of the loan—when the borrower pays the loan back before it reaches term—may incur penalties, depending on the loan. An additional fee could also be imposed in the event of a redraw. Under the National Credit Code, penalties for early repayment are illegal on new loans since September 2012; however, a bank may charge a reasonable administration fee for preparation of the discharge of mortgage.

All reverse mortgages written since September 2012 must have a "No Negative Equity Guarantee". This means that if the balance of the loan exceeds the proceeds of sale of the property, no claim for this excess will be made against the estate or other beneficiaries of the borrower.

On 18 September 2012, the government introduced statutory 'negative equity protection' on all new reverse mortgage contracts. This means the borrower cannot end up owing the lender more than their home is worth (the market value or equity). In a reverse mortgage begun before 18 September 2012, the contract specifies whether the borrower is protected when the loan balance ends up being more than the value of the property.

When the reverse mortgage contract ends and the borrower's home is sold, the lender will receive the proceeds of the sale and the borrower cannot be held liable for any debt in excess of this (except in certain circumstances, such as fraud or misrepresentation). Where the property sells for more than the amount owed to the lender, the borrower or his estate will receive the extra funds.

Canada

According to the October 2018 filings of the Office of the Superintendent of Financial Institutions (OSFI), an independent federal agency reporting to the Minister of Finance in that month, the outstanding reverse mortgage debt for Canadians soared to $CDN3.42 billion, setting a new record for both the monthly and the annual increases. Daniel Wong at Better Dwelling wrote that, the jump represented an 11.57% increase from September, which is the second biggest increase since 2010, 844% more than the median monthly pace of growth. The annual increase of 57.46% is 274% larger than the median annualized pace of growth.

Reverse mortgages in Canada are available through three financial institutions - Home Equity Bank, Equitable Bank and Bloom Financial. No reverse mortgages issued in Canada are insured by the government due to the nature of the product.

The cost of getting a reverse mortgage from a private sector lender may exceed the costs of other types of mortgage or equity conversion loans. Exact costs depend on the particular reverse mortgage program the borrower acquires and vary from lender to lender. Depending on the program, there may be other costs.

Money received in a reverse mortgage is still considered a loan and therefore is not taxable income. It therefore does not affect government benefits from Old Age Security (OAS) or Guaranteed Income Supplement (GIS).

The reverse mortgage comes due—the loan plus interest must be repaid—when the borrower dies, sells the property, or moves out of the house. Depending on the program, the reverse mortgage may be transferable to a different property if the owner moves. Prepayment of the loan—when the borrower pays the loan back before it reaches term—may incur penalties, depending on the program.

United States

The FHA-insured Home Equity Conversion Mortgage, or HECM, was signed into law on February 5, 1988, by President Ronald Reagan as part of the Housing and Community Development Act of 1987. The first HECM was given to Marjorie Mason of Fairway, Kansas, in 1989 by James B. Nutter and Company.

In the United States, the FHA-insured HECM (home equity conversion mortgage), a.k.a. reverse mortgage, is a non-recourse loan. In simple terms, the borrowers are not responsible to repay any loan balance that exceeds the net-sales proceeds of their home. For example, if the last borrower left the home and the loan balance on their FHA-insured reverse mortgage was $125,000, and the home sold for $100,000, neither the borrower nor their heirs would be responsible for the $25,000 on the reverse mortgage loan that exceeded the value of their home. 

The extra $25,000 would be paid from the FHA insurance that was purchased when the HECM loan was originated. A reverse mortgage cannot go upside down. The cost of the FHA mortgage insurance is a one-time fee of 2% of the appraised value of the home, and an annual fee of 0.5% of the outstanding loan balance.

According to a 2015 article in the Journal of Urban Economics, about 12% of the United States HECM reverse mortgage borrowers defaulted on "their property taxes or homeowners insurance"—a "relatively high default rate". However, the data was derived from participants during 2006–2011 and compared them to homeowners with forward mortgages and not homeowners without a mortgage. This research caused a reform in reverse mortgages in 2013: homeowners could only withdraw 60% of their available proceeds in the first year. 

The retired population normally does not have the same level of income to afford increases in taxes and insurance as individuals with a traditional mortgage. In the United States, reverse mortgage borrowers as well as any homeowner can face foreclosure if they do not maintain their homes or keep up to date on homeowner's insurance and property taxes. 

The FBI, Inspector General, and HUD urge American consumers, especially senior citizens, to be cautious when considering reverse mortgages to avoid scams. HUD specifically warns consumers to "beware of scam artists that charge thousands of dollars for information that is free from HUD".

In a 2018 study, reverse mortgage borrowers have significantly higher financial and housing satisfaction compared to nonborrowers. Reverse mortgages received fewer complaints than any other mortgage product. Among a total of 32,000 consumer complaints received by the Consumer Financial Protection Bureau (CFPB) in 2021, only approximately 300 of those complaints — under 1% — had to do with reverse mortgage loans.

Eligibility

To qualify for the HECM reverse mortgage in the United States, borrowers generally must be at least 62 years of age and the home must be their primary residence (second homes and investment properties do not qualify).

On April 25, 2014, FHA revised the HECM age eligibility requirements to extend certain protections to spouses younger than age 62. Under the old guidelines, the reverse mortgage could only be written for the spouse who was 62 or older. If the older spouse died, the reverse mortgage balance became due and payable if the younger surviving spouse was left off of the HECM loan. 

If this younger spouse was unable to pay off or refinance the reverse mortgage balance, he or she was forced either to sell the home or lose it to foreclosure. This often created a significant hardship for spouses of deceased HECM mortgagors, so FHA revised the eligibility requirements in Mortgagee Letter 2014-07. Under the new guidelines, spouses who are younger than age 62 at the time of origination retain the protections offered by the HECM program if the older spouse who got the mortgage dies. 

This means that the surviving spouse can remain living in the home without having to repay the reverse mortgage balance as long as he or she keeps up with property taxes and homeowner's insurance and maintains the home to a reasonable level.

For a reverse mortgage to be a viable financial option, existing mortgage balances usually must be low enough to be paid off with the reverse mortgage proceeds. However, borrowers do have the option of paying down their existing mortgage balance to qualify for a HECM reverse mortgage.

The HECM reverse mortgage follows the standard FHA eligibility requirements for property type, meaning most 1–4 family dwellings, FHA-approved condominiums, and PUDs qualify. Manufactured homes also qualify as long as they meet FHA standards.

Before starting the loan process for an FHA/HUD-approved reverse mortgage, applicants must take an approved counseling course. An approved counselor should help explain how reverse mortgages work, the financial and tax implications of taking out a reverse mortgage, payment options, and costs associated with a reverse mortgage. The counseling is meant to protect borrowers, although the quality of counseling has been criticized by groups such as the Consumer Financial Protection Bureau.

In a 2010 survey of elderly Americans, 48% of respondents cited financial difficulties as the primary reason for obtaining a reverse mortgage and 81% stated a desire to remain in their current homes until death.

Amount of proceeds available

The total pool of money that a borrower can receive from a HECM reverse mortgage is called the principal limit (PL), which is calculated based on the maximum claim amount (MCA), the age of the youngest borrower, the expected interest rate (EIR), and a table to PL factors published by HUD. 

Similar to loan-to-value (LTV) in the forward mortgage world, the principal limit is essentially the percentage of the value of the home that can be lent under the FHA HECM guidelines. Most PLs are typically in the range of 50% to 60% of the MCA, but they can sometimes be higher or lower. The table below gives examples of principal limits for various ages and EIRs and a property value of $250,000.

Options for distribution of proceeds

The money from a reverse mortgage can be distributed in four ways, based on the borrower's financial needs and goals:

• Lump sum in cash at settlement
• Monthly payment (loan advance) for a set number of years (term) or life (tenure)
• Line of credit (similar to a home equity line of credit)
• Some combination of the above

The adjustable-rate HECM offers all of the above payment options, but the fixed-rate HECM only offers lump sum.

The line of credit option accrues growth, meaning that whatever is available and unused on the line of credit will automatically grow larger at a compounding rate. This means that borrowers who opt for a HECM line of credit can potentially gain access to more cash over time than what they initially qualified for at origination.

The line of credit growth rate is determined by adding 1.25% to the initial interest rate (IIR), which means the line of credit will grow faster if the interest rate on the loan increases.

On 3 September 2013 HUD implemented Mortgagee Letter 2013-27, which made significant changes to the amount of proceeds that can be distributed within the first year of the loan.[35] Because many borrowers were taking full draw lump sums (often at the encouragement of lenders) at closing and burning through the money quickly, HUD sought to protect borrowers and the viability of the HECM program by limiting the amount of proceeds that can be accessed within the first 12 months of the loan.

If the total mandatory obligations (which includes existing mortgage balances, all closing costs, delinquent federal debts, and purchase transaction costs) to be paid by the reverse mortgage are less than 60% of the principal limit, then the borrower can draw additional proceeds up to 60% of the principal limit in the first 12 months. Any remaining available proceeds can be accessed after 12 months.

If the total mandatory obligations exceed 60% of the principal limit, then the borrower can draw an additional 10% of the principal limit if available.

HECM for purchase

The Housing and Economic Recovery Act of 2008 provided HECM mortgagors with the opportunity to purchase a new principal residence with HECM loan proceeds — the so-called HECM for Purchase program, effective January 2009. The "HECM for Purchase" applies if "the borrower is able to pay the difference between the HECM and the sales price and closing costs for the property. The program was designed to allow the elderly to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing. Texas was the last state to allow for reverse mortgages for purchase.

Taxes and insurance

Unlike traditional forward mortgages, there are no escrow accounts in the reverse mortgage world. Property taxes and homeowners insurance are paid by the homeowner on their own, which is a requirement of the HECM program (along with the payment of other property charges such as HOA dues).

Life expectancy set aside (LESA)

If a reverse mortgage applicant fails to meet the satisfactory credit or residual income standards required under the new financial assessment guidelines implemented by FHA on March 2, 2015, the lender may require a Life Expectancy Set Aside, or LESA. A LESA carves out a portion of the reverse mortgage benefit amount for the payment of property taxes and insurance for the borrower's expected remaining life span. FHA implemented the LESA to reduce defaults based on the nonpayment of property taxes and insurance.

Taxability of HECM proceeds

The American Bar Association guide advises that generally,

• The Internal Revenue Service does not consider loan advances to be income.
• Annuity advances may be partially taxable.
• Interest charged is not deductible until it is actually paid, that is, at the end of the loan.
• The mortgage insurance premium is deductible on the 1040 long form.
• The money used from a reverse mortgage is not taxable.

The money received from a reverse mortgage is considered a loan advance. It therefore is not taxable and does not directly affect Social Security or Medicare benefits. However, an American Bar Association guide to reverse mortgages explains that if borrowers receive Medicaid, SSI, or other public benefits, loan advances will be counted as "liquid assets" if the money is kept in an account (savings, checking, etc.) past the end of the calendar month in which it is received; the borrower could lose eligibility for such public programs if total liquid assets (cash, generally) is then greater than those programs allow.

When the loan comes due

The HECM reverse mortgage is not due and payable until the last borrower (or non-borrowing spouse) dies, sells the house, or fails to live in the home for a period greater than 12 months. The loan may also become due and payable if the borrower fails to pay property taxes or homeowners insurance, lets the condition of the home significantly deteriorate, or transfers the title of the property to a non-borrower (excluding trusts that meet HUD's requirements).

Volume of loans

Home Equity Conversion Mortgages account for 90% of all reverse mortgages originated in the U.S. As of May 2010, there were 493,815 active HECM loans. As of 2006, the number of HECM mortgages that HUD is authorized to insure under the reverse mortgage law was capped at 275,000.[46] However, through the annual appropriations acts, Congress has temporarily extended HUD's authority to insure HECMs notwithstanding the statutory limits.

Program growth in recent years has been very rapid. In fiscal year 2001, 7,781 HECM loans were originated. By the fiscal year ending in September 2008, the annual volume of HECM loans topped 112,000 representing a 1,300% increase in six years. For the fiscal year ending September 2011, loan volume had contracted in the wake of the financial crisis, but remained at over 73,000 loans that were originated and insured through the HECM program.

Since the HECM program was created analysts have expected loan volume to grow further as the U.S. population ages. In 2000, the Census Bureau estimated that 34 million of the country's 270 million residents were sixty-five years of age or older,[49] while projecting the two totals to rise to 62 and 337 million, respectively, in 2025. In addition, the Center For Retirement Research at Boston College estimates that more than half of retirees “may be unable to maintain their standard of living in retirement.”. The low adoption rates can be partially explained by dysfunctional aspects of the reverse mortgage market, including high markups, complexity of the product, consumer distrust of reverse mortgage lenders, and lack of pricing transparency.

Hong Kong

Hong Kong Mortgage Corporation (HKMC), a government sponsored entity similar to that of Fannie Mae and Freddie Mac in the US, provides credit enhancement service to commercial banks that originate reverse mortgage. Besides providing liquidity to the banks by securitization, HKMC can offer guarantee of reverse mortgage principals up to a certain percentage of the loan value. As of 2016, reverse mortgage is available to house-owners aged 55 or above from 10 different banks. Applicants can also boost the loan value by pledging their in-the-money life insurance policies to the bank. In terms of the use of proceed, applicants are allowed to make one-off withdrawal to pay for property maintenance, medical and legal costs, in addition to the monthly payout.

Taiwan

A trial program for reverse mortgages was launched in 2013 by the Financial Supervisory Commission, Ministry of the Interior. Taiwan Cooperative Bank was the first bank to offer such a product. As of June 2017, reverse mortgages are available from a total of 10 financial institutions. However, social stigma associated with not preserving real estate for inheritance has prevented reverse mortgages from widespread adoption.

Criticism

Reverse mortgages have been criticized for several major shortcomings:

• Possible high up-front costs make reverse mortgages expensive. In the United States, entering a reverse mortgage will cost approximately the same as a traditional FHA mortgage, depending on the loan-to-value ratio.
• The interest rate on a reverse mortgage may be higher than on a conventional "forward mortgage".
• Interest compounds over the life of a reverse mortgage, which means that "the mortgage can quickly balloon". Since no monthly payments are made by the borrower on a reverse mortgage, the interest that accrues is treated as a loan advance. Each month, interest is calculated not only on the principal amount received by the borrower, but on the interest previously assessed to the loan. Because of this compound interest, as a reverse mortgage's length grows, it becomes more likely to deplete the entire equity of the property. However, with an FHA-insured HECM reverse mortgage obtained in the United States or any reverse mortgage obtained in Canada, the borrower can never owe more than the value of the property and cannot pass on any debt from the reverse mortgage to any heirs. The sole remedy the lender has is the collateral, not assets in the estate, if applicable.
• Reverse mortgages can be confusing; many obtain them without fully understanding the terms and conditions, and a 2012 U.S. report suggests that some lenders have sought to take advantage of this complexity to offer contracts that disadvantage homeowners. A majority of respondents to a 2000 survey of elderly Americans failed to understand the financial terms of reverse mortgages very well when securing their reverse mortgages. "In the past, government investigations and consumer advocacy groups raised significant consumer protection concerns about the business practices of reverse mortgage lenders and other companies in the reverse mortgage industry." In a 2006 survey of borrowers by AARP, ninety-three percent said their reverse mortgage had a mostly positive effect on their lives, compared with three percent who said the effect was mostly negative. Some ninety-three percent of borrowers reported that they were satisfied with their experiences with lenders, and ninety-five percent reported that they were satisfied with the counselors that they were required to see.

What Is Lenders Mortgage Insurance

 

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Lenders mortgage insurance (LMI), also known as private mortgage insurance (PMI) in the US, is a type of insurance payable to a lender or to a trustee for a pool of securities that may be required when taking out a mortgage loan. Its purpose is to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.

Mortgage insurance in the US

The annual cost of PMI varies and is expressed in terms of the total loan value in most cases, depending on the loan term, loan type, proportion of the total home value that is financed, the coverage amount, and the frequency of premium payments (monthly, annual, or single). The PMI may be payable up front, or it may be capitalized onto the loan in the case of single premium product. 

This type of insurance is usually only required if the downpayment is 20% or less of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). Once the principal is reduced to 80% of value, the PMI is often no longer required on conventional loans. This can occur via the principal being paid down, via home value appreciation, or both. FHA loans often require refinancing to remove PMI, even after the LTV drops below 80%. 

The effective interest savings from paying off PMI can be substantial. In the case of lender-paid MI, the term of the policy can vary based upon the type of coverage provided (either primary insurance, or some sort of pool insurance policy). Borrowers typically have no knowledge of any lender-paid MI, in fact most "No MI Required" loans actually have lender-paid MI, which is funded through a higher interest rate that the borrower pays.

Sometimes lenders will require that mortgage insurance be paid for a fixed period (for example, 2 or 3 years), even if the principal reaches 80% sooner than that. Legally, there is no obligation to allow the cancellation of MI until the loan has amortized to a 78% LTV ratio based on the original purchase price. The cancellation request must come from the servicer of the mortgage to the PMI company who issued the insurance. Often the servicer will require a new appraisal to determine the LTV.

If borrowers have less than the 20% down payment needed to avoid a mortgage insurance requirement, they might be able to make use of a second mortgage (sometimes referred to as a "piggy-back loan") to make up the difference. Two popular versions of this lending technique are the so-called 80/10/10 and 80/15/5 arrangements. Both involve obtaining a primary mortgage for 80% LTV. An 80/10/10 program uses a 10% LTV second mortgage with a 10% downpayment, and an 80/15/5 program uses a 15% LTV second mortgage with a 5% downpayment. 

Other combinations of second mortgage and downpayment amounts might also be available. One advantage of using these arrangements is that under United States tax law, mortgage interest payments may be deductible on the borrower's income taxes, whereas mortgage insurance premiums were not until 2007. In some situations, the all-in cost of borrowing may be cheaper using a piggy-back than by going with a single loan that includes borrower-paid or lender-paid MI.

LMI/PMI tax deduction

Mortgage insurance became tax-deductible in 2007 in the US. For some homeowners, the new law made it cheaper to get mortgage insurance than to get a 'piggyback' loan. The MI tax deductibility provision passed in 2006 provides for an itemized deduction for the cost of private mortgage insurance for homeowners earning up to $109,000 annually.

The original law was extended in 2007 to provide for a three-year deduction, effective for mortgage contracts issued after December 31, 2006, and before January 1, 2010. It does not apply to mortgage insurance contracts that were in existence prior to passage of the legislation.

As of 2023, PMI was tax deductible for all years from 2007 until 2021. The IRS does not allow the PMI to be deducted for 2022.

Mortgage insurance in Australia

The two main mortgage insurers in Australia are Helia and QBE LMI. Mortgage insurance is payable if the loan-to-value ratio (LTV, or LVR in Australia) is above 80%, or above 60% for low document loans. Some non-bank lenders obtain mortgage insurance for every loan irrespective of the LVR, however it is paid for by the lender if the loan is below 80% LVR.

LMI premiums are calculated using a sliding scale based on the loan amount and LVR. State government stamp duty may be payable on the premium. The premium is often capitalised on top of the loan amount. Unlike in other countries, the LMI premium is a one-off fee in Australia.

Mortgage insurance in Canada

The Bank Act which governs banks as well as provincial laws governing credit unions and caisse populaires prohibit most regulated lending institutions from providing mortgages without insurance if the LTV is greater than 80%. The typical premium rates provided by Canada Mortgage and Housing Corporation are between 1% (for 80% LTV) and 2.75% (for 95% LTV) of the loan principal.

Enact Insurance: Core and Complementary Businesses

 

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Core Business: Private Mortgage Insurance (PMI)

Enact Holdings, Inc., operating primarily through its subsidiary Enact Mortgage Insurance Corporation (EMICO), is a leading provider of private mortgage insurance in the United States. Established in 1981 and headquartered in Raleigh, North Carolina, Enact offers mortgage insurance solutions that enable lenders to provide affordable financing options to homebuyers with down payments as low as 3%. These solutions are crucial for borrowers who might otherwise struggle to afford a home.

Approved by Fannie Mae and Freddie Mac, Enact is licensed to operate in all 50 states and the District of Columbia. The company's mortgage insurance products provide private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners.

Complementary Business: Mortgage Reinsurance

In addition to its core mortgage insurance offerings, Enact operates Enact Re Ltd., a Bermuda-based subsidiary specializing in mortgage-related insurance and reinsurance. Enact Re provides reinsurance solutions to the government-sponsored enterprises (GSEs) and reinsures a portion of Enact's new insurance written. This reinsurance segment enhances Enact's ability to manage risk and capital, contributing to the company's overall financial strength and stability.

Enact has entered into multiple quota share reinsurance agreements, ceding portions of its expected new insurance written to a panel of highly rated reinsurers. For instance, in December 2024, Enact announced two quota share reinsurance agreements, ceding approximately 27% of a portion of expected new insurance written for the periods from January 1, 2025, through December 31, 2025, and from January 1, 2026, through December 31, 2026. 

Furthermore, Enact has secured excess of loss (XOL) reinsurance coverage through insurance-linked note (ILN) transactions. In November 2023, Enact completed its sixth ILN issuance, securing $248 million of fully collateralized XOL reinsurance coverage for a portfolio of existing seasoned mortgage insurance policies. 

Technology and Innovation

Enact integrates technology into its operations to enhance efficiency and customer experience. The company offers Rate360℠, a pricing engine that provides tailored mortgage insurance rates based on each loan's characteristics. Lenders can easily access these rates through platforms like Rate Express® or Optimal Blue, streamlining the quoting and ordering process. 

As of 2024, Enact continues to demonstrate resilience and adaptability in the evolving mortgage and housing finance landscape. The company's diversified business model, encompassing private mortgage insurance, reinsurance, and technology solutions, positions it well to navigate changing market conditions and meet the needs of lenders, borrowers, and investors. 

Enact's comprehensive approach, combining core mortgage insurance with complementary services and technological innovation, underscores its commitment to supporting homeownership and contributing to the stability and growth of the U.S. housing finance system.

Enact Insurance: A Legacy of Empowering Homeownership

 

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Origins and Evolution

Enact Holdings, Inc., a prominent U.S. private mortgage insurer, traces its roots to 1981 when it was originally established as GE Mortgage Insurance Corporation. In 2001, the company became part of Genworth Financial, Inc. In 2012, it was reorganized and rebranded as Enact Mortgage Insurance Corporation (EMICO), serving as the primary insurance subsidiary of the newly formed Enact Holdings, Inc. This strategic move marked a significant step in the company's evolution, aligning its identity with its mission to facilitate homeownership through innovative mortgage insurance solutions. 

Rebranding and Strategic Shift

In May 2021, Enact Holdings unveiled a refreshed brand identity, transitioning from its previous association with Genworth Financial to a standalone entity. This rebranding included a new name, visual identity, and corporate website, reflecting the company's proactive and responsive approach to serving its customers. Despite the change in branding, Enact reaffirmed its commitment to helping people purchase homes and maintain homeownership, emphasizing a customer-centric approach and innovative solutions. 

Public Offering and Financial Growth

In September 2021, Enact Holdings completed a minority initial public offering (IPO), selling 18.4% of its common stock to the public. Genworth Financial retained a majority ownership stake. This strategic move allowed Enact to access additional capital and enhance its financial flexibility as an independent company, positioning it for sustained growth and innovation in the mortgage insurance sector. 

Global Expansion and Reinsurance Ventures

Enact has expanded its operations beyond the U.S. through its wholly owned Bermuda-based subsidiary, Enact Re Ltd. ("Enact Re"). Enact Re provides mortgage-related insurance and reinsurance, contributing to the company's global footprint. In 2023, Enact Re executed its first international reinsurance deal with a leading mortgage insurance provider in Australia, marking a significant milestone in Enact's global expansion efforts. 

As of 2024, Enact continues to demonstrate resilience and adaptability in the evolving mortgage and housing finance landscape. The company's diversified business model, encompassing private mortgage insurance, reinsurance, and title insurance services, positions it well to navigate changing market conditions and meet the needs of lenders, borrowers, and investors.

Enact's journey from its origins as GE Mortgage Insurance Corporation to becoming a leading private mortgage insurer underscores its dedication to innovation, capital strength, and support for homeownership. The company's continued focus on risk management and customer-centric solutions ensures its ongoing impact on the housing finance system.

Essent Guaranty: Core and Complementary Businesses in Mortgage Insurance

 

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Core Business: Private Mortgage Insurance (PMI)

Essent Guaranty, Inc., a subsidiary of Essent Group Ltd., is a leading provider of private mortgage insurance in the United States. Established in 2008 and headquartered in Radnor, Pennsylvania, Essent offers mortgage insurance solutions for single-family loans, enabling lenders to offer affordable financing options to homebuyers with down payments as low as 3%. This support is crucial for borrowers who might otherwise struggle to afford a home. 

Approved by Fannie Mae and Freddie Mac, Essent Guaranty is licensed to operate in all 50 states and the District of Columbia. The company's mortgage insurance products provide private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. 

Complementary Business: Mortgage Reinsurance

In addition to its core mortgage insurance offerings, Essent Group Ltd. operates Essent Reinsurance Ltd., a Bermuda-based subsidiary specializing in mortgage-related insurance and reinsurance. Essent Re provides reinsurance solutions to the government-sponsored enterprises (GSEs) and reinsures a portion of Essent Guaranty's new insurance written. 

This reinsurance segment enhances Essent's ability to manage risk and capital, contributing to the company's overall financial strength and stability.

Additional Services: Title Insurance and Settlement Services

Expanding its service offerings, Essent Group Ltd. acquired Agents National Title Insurance Company and Boston National Holdings LLC in July 2023. These acquisitions led to the formation of Essent Title Insurance, Inc., a nationally licensed title insurance provider. Through this subsidiary, Essent offers title insurance products and title and settlement services across all 50 states and the District of Columbia. 

These services support various forms of mortgage originations and real estate transactions, including refinances, purchases, private wealth, commercial, home equity lines of credit (HELOCs), and reverse mortgages. They also assist in managing default transactions, providing a comprehensive suite of solutions to the housing finance industry. 

Strategic Integration and Technology

Essent Guaranty has integrated its services with major loan origination systems (LOS) to streamline processes for lenders. For instance, the company has partnered with Mortgage Cadence's Enterprise Lending Center (ELC), allowing lenders to access Essent MI services directly within the ELC platform. This integration facilitates real-time rate quotes and seamless ordering of mortgage insurance, enhancing efficiency and accuracy in the lending process. 

As of 2024, Essent Group Ltd. continues to demonstrate resilience and adaptability in the evolving mortgage and housing finance landscape. The company's diversified business model, encompassing private mortgage insurance, reinsurance, and title insurance services, positions it well to navigate changing market conditions and meet the needs of lenders, borrowers, and investors. 

Essent Guaranty's comprehensive approach, combining core mortgage insurance with complementary services, underscores its commitment to supporting homeownership and contributing to the stability and growth of the U.S. housing finance system.

History of Essent Guaranty Insurance

 

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Essent Guaranty, Inc., a prominent private mortgage insurer in the United States, has significantly influenced the mortgage insurance landscape since its inception. Established in 2008 and headquartered in Radnor, Pennsylvania, Essent was founded with the vision of providing private capital to mitigate mortgage credit risk, thereby facilitating affordable homeownership. The company commenced issuing mortgage insurance policies in May 2010, marking its entry into the market. 

Foundation and Strategic Initiatives

Essent was created to address the need for a new mortgage insurer that was not encumbered by the legacy issues faced by existing companies following the 2008 financial crisis. The company secured $600 million in equity commitments from investors such as Goldman Sachs, J.P. Morgan, and Pine Brook Road Partners. 

In February 2010, Essent received approval from Fannie Mae and Freddie Mac to operate as a qualified mortgage insurer, enabling it to insure loans sold to these government-sponsored enterprises. 

Growth and Innovation

By 2014, Essent had expanded its operations to serve approximately 1,500 lenders, assisting over 2.5 million homebuyers. The company introduced innovative products like the Clarity of Coverage endorsement, which provided greater transparency and fairness in mortgage insurance claims. 

In 2017, Essent launched EssentIQ™, a homebuyer education tool that won the HW TECH100™ award for its data-driven design, helping consumers understand the financial benefits of homeownership. 

Expansion and Reinsurance Ventures

Essent diversified its operations by establishing Essent Reinsurance Ltd. in Bermuda, focusing on mortgage reinsurance. In 2024, Essent Guaranty closed a $363.4 million mortgage reinsurance transaction through Radnor Re 2024-1 Ltd., a special purpose insurer. This marked the tenth issuance of mortgage insurance-linked notes by Essent, totaling over $4 billion. 

Recognition and Leadership

In 2014, CEO Mark Casale was honored with the EY Entrepreneur of the Year™ award for his leadership in founding and growing Essent into a successful mortgage insurer. 

As of 2023, Essent continues to lead in the mortgage insurance industry, offering innovative solutions and maintaining a strong capital position. The company's commitment to risk management and customer service positions it well for future growth and success in the evolving housing finance landscape. 

Essent Guaranty's journey from its founding to becoming a key player in the mortgage insurance industry underscores its dedication to innovation, capital strength, and support for homeownership. The company's continued focus on risk management and customer-centric solutions ensures its ongoing impact on the housing finance system.

The Rise of National Mortgage Insurance Corporation (National MI): A Modern Mortgage Insurer

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National Mortgage Insurance Corporation (National MI) is a prominent player in the U.S. mortgage insurance industry, known for its innovative approach and commitment to facilitating homeownership. Established in 2012, National MI has rapidly grown to become a significant force in the sector.

Founding and Early Growth

Founded in 2012 by Bradley Shuster and Jay Sherwood, National MI was created to provide private mortgage insurance solutions that support low down payment borrowers while protecting lenders and investors against losses related to borrower defaults. The company raised $500 million in private capital to launch its operations and received approvals from Fannie Mae and Freddie Mac in January 2013, allowing it to deliver loans to both government-sponsored enterprises. 

By April 2014, National MI had signed master policies with 478 lenders, including six of the country's largest lenders, and was licensed to write mortgage guaranty insurance in all 50 U.S. states and the District of Columbia. The company also introduced its innovative National MI SafeGuard® product, offering rescission relief after 12 timely payments, significantly reducing lenders' repurchase risk. 

Expansion and Industry Recognition

In November 2013, National MI's holding company, NMI Holdings, Inc., went public, trading on the NASDAQ under the symbol "NMIH." This move provided the company with additional capital to expand its operations and services. By March 2016, National MI had surpassed 1,000 lender customers nationwide, celebrating its third year in business with significant growth and industry recognition. 

The company continued to innovate by introducing a nationwide, risk-based pricing structure and expanding its product offerings to meet the evolving needs of the mortgage industry. 

Workplace Excellence

National MI has been consistently recognized for its exceptional workplace culture. In June 2023, the company was certified as a Great Place to Work® for the eighth consecutive year, reflecting its commitment to fostering an inclusive and collaborative environment where employees can thrive. 

As of 2023, National MI continues to lead the industry with innovative solutions and a strong commitment to supporting homeownership. With a solid foundation and a focus on customer-centric services, the company is well-positioned for sustained growth and success in the evolving mortgage landscape.

National MI's journey from its inception to becoming a leading mortgage insurer highlights its dedication to innovation, customer service, and workplace excellence. As the company continues to evolve, it remains a key player in making homeownership more accessible to borrowers across the United States.

The Evolution of Radian Group: From Mortgage Insurance Pioneer to Real Estate Services Leader

 

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Radian Group Inc. has transformed from a specialized mortgage insurer into a comprehensive provider of mortgage, risk, and real estate services. Headquartered in Philadelphia, Pennsylvania, Radian's journey is marked by strategic growth, technological innovation, and a commitment to enhancing homeownership accessibility.

Origins and Public Offering

Established in 1977 as Commonwealth Mortgage Assurance Company (CMAC), Radian entered the mortgage insurance industry with a focus on protecting lenders against default-related losses. In 1992, CMAC went public, trading on the New York Stock Exchange under the symbol RDN. This move positioned the company for expansion and increased visibility in the financial sector.

Merger and Rebranding

In 1999, CMAC merged with Amerin Corporation, forming Radian Group Inc. This merger consolidated resources and expertise, allowing Radian to offer a broader range of services within the mortgage and real estate sectors. The company also modernized its brand identity to reflect its expanded capabilities and commitment to innovation. 

Expansion of Services

Radian's growth strategy involved acquiring companies that complemented its core offerings:

2014: Acquired Green River Capital, enhancing its asset management services.

2015: Added title and closing services through the acquisition of ValuAmerica and automated valuation products via Red Bell Real Estate.

2018: Expanded into title insurance with the acquisition of Entitle Direct Group, now known as Radian Title Insurance.

These acquisitions enabled Radian to provide end-to-end solutions across the mortgage and real estate services lifecycle. 

Embracing Technology

Radian has been at the forefront of integrating technology into its services:

2012: Launched Radian Rates, the first-ever mortgage insurance rate quote app, simplifying the process for lenders and borrowers.

2019: Acquired Five Bridges Advisors, enhancing its capabilities in data analytics, artificial intelligence, and machine learning to better assess risk and inform decision-making. 

These technological advancements have streamlined operations and improved service delivery.

Unified Brand Identity

In May 2020, Radian launched a redesigned corporate website, consolidating its various services under the unified "ONE Radian" brand. This rebranding effort highlighted the company's integrated approach and commitment to delivering comprehensive solutions to its clients. 

Financial Strength and Recognition

As of 2024, Radian Group reported a net income of $672.3 million. The company maintains a strong financial position, with significant liquidity and capital reserves. In January 2025, Fitch Ratings upgraded Radian Guaranty's insurance financial strength rating to 'A' from 'A-', reflecting the company's robust financial health. 

Radian Group continues to innovate and expand its services, aiming to make sustainable homeownership possible for more people. With a focus on removing barriers to homebuying and leveraging technology to enhance decision-making, Radian is well-positioned to lead in the evolving mortgage and real estate services industry.

Radian Group Corporation Private Mortgage Insurance PMI

 

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Radian Group Inc. (NYSE: RDN) is a mortgage insurance company with a suite of mortgage, risk, real estate, and title services.

The company is headquartered at Centre Square in Philadelphia.

Radian Companies

Radian is a group of separately capitalized companies that share a unified strategic focus. Radian's core business, Radian Guaranty Inc., provides private mortgage insurance to protect lenders from default-related losses, facilitate the sale of low-down-payment mortgages in the secondary market and enable homebuyers to purchase homes with down-payments less than 20%. In 2019 it had a net income of $672.3 million. Vanguard Group Inc, FMR LLC, Blackrock Inc are some of the highest stock holders of Radian Group Inc.

Core Business: Mortgage Insurance

Radian's primary focus is on providing private mortgage insurance (PMI) through its subsidiary, Radian Guaranty Inc. This segment offers credit protection to mortgage lenders and investors against default-related losses on residential first-lien mortgage loans. By enabling low-down-payment lending, Radian facilitates homeownership opportunities for borrowers while supporting the stability of the housing finance system. 

Additional Business Segments

Beyond mortgage insurance, Radian has expanded its offerings through the Homegenius segment, which encompasses a range of real estate and mortgage-related services:

• Title Services: Providing title insurance and related services to ensure clear property ownership.
• Real Estate Services: Offering asset management, appraisal, settlement, and closing services.
• Real Estate Technology: Developing platforms and tools to streamline real estate transactions.
• Mortgage Conduit: Facilitating the aggregation and distribution of mortgage credit risk.

These services are designed to complement Radian's core mortgage insurance business, creating a comprehensive suite of solutions for clients in the mortgage and real estate industries. 

Strategic Investments

In line with its commitment to innovation, Radian has made strategic investments in technology-driven companies. Notably, Radian invested in FinLocker, a personal financial fitness and homeownership tool that aggregates and analyzes consumer financial data to offer personalized paths to mortgage eligibility and other financial transactions. This investment aligns with Radian's goal to enhance the homebuying process through technology. 

Financial Overview

As of 2024, Radian Group reported revenues of approximately $1.3 billion. The company's diversified business model, combining mortgage insurance with real estate services, positions it for sustained growth and resilience in the evolving housing finance landscape. 

In summary, Radian Group's core business of mortgage insurance is complemented by its Homegenius services and strategic investments in technology, creating a robust platform that supports homeownership and addresses the diverse needs of the mortgage and real estate markets.

MGIC Investment Corporation Private Mortgage Insurance PMI

 

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MGIC Investment Corporation NYSE: MTG ("MGIC") is a provider of private mortgage insurance in the United States. The company is headquartered in Milwaukee, Wisconsin.

In addition to mortgage insurance, MGIC provides lenders with various underwriting and other services and products related to home mortgage lending. Today, MGIC serves lenders in the United States, Puerto Rico and Guam with obtaining mortgage insurance.

The company's key executives are Pat Sinks (Chief Executive Officer), Steve Mackey (EVP Chief Risk Officer), Paula Maggio (EVP General Counsel and Corporate Secretary), Tim Mattke (EVP and Chief Financial Officer), Jay Hughes (EVP Sales and Business Development), Sal Miosi (EVP Business Strategy and Operations).

History

In 1957, the company was founded in Milwaukee by Max H. Karl, a real estate attorney who noticed that his clients were having trouble paying for their new homes. Karl invented modern private mortgage insurance and secured US$250,000 from investors, including friends and business associates, to open MGIC. In 1982, Karl sold the company to Baldwin United for $1.2 billion. In 1983 Baldwin United filed for Chapter 11 bankruptcy protection, and in 1985 MGIC was liquidated and its assets sold to Northwestern Mutual for $775 million. That same year, Karl and others set up a new company with the same name. In 1987, Bill Lacy was appointed chairman and chief executive officer of the company. Lacy died in 2016. In 1995, the founder of the company, Max H. Karl, died.

Headquarters

MGIC's four-story headquarters is located at 250 Kilbourn Avenue in downtown Milwaukee. The building was designed in an inverted pyramid shape by Fitzhug Scott-Architects, Inc. and Skidmore, Owings & Merrill and was completed in 1973. The building was extensively renovated by Eppstein Uhen Architects and Hunzinger Construction in 2019.

Community service

MGIC supports many community organizations through donations and volunteering. They currently have programs and campaigns supporting United Way, Junior Achievement, United Performing Arts Fund, Milwaukee Public Television, Habitat for Humanity, Secure Futures and many other nonprofit organizations.

Honors

Mortgage Guaranty Insurance Corporation has been named a "Top Workplace" by the Milwaukee Journal Sentinel every year since 2010.

In 2015, MGIC was one of the winners of the Healthiest Employers awarded by the Milwaukee Business Journal. MGIC received a 2018 Platinum WELCOA Well Workplace Award.

F&G Insurance Mortgage Protection Insurance MPI

 

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F&G Annuities & Life, Inc. is a public company headquartered in Des Moines, Iowa. It primarily provides annuities, life insurance, and pension buyout services. The company was founded in 1959.

Known as Fidelity & Guaranty Life until a 2019 rebrand, the company has been a subsidiary of Fidelity National Financial, a previously unrelated company, since 2020.

History

The company was incorporated in 1959 under the laws of Maryland and commenced business in 1960. The company was primarily formed to write individual life insurance and annuity products. Until June 1, 1995, the company was a wholly owned subsidiary of United States Fidelity and Guaranty Company ("USF&G Company"), a Maryland-domiciled property and casualty insurer. USF&G Corporation, a Maryland-domiciled insurance holding company, was the company's ultimate controlling entity.

On January 20, 1998, St. Paul announced that it would acquire USF&G for $2.8 billion and merge both entities into a single organization. On April 24, 1998, as a result of the merger of its parent, USF&G Corporation, with The St. Paul Companies, Inc. (St. Paul Travelers), an insurance holding company incorporated in the state of Minnesota, the company became an indirect subsidiary of St. Paul Companies, Inc. Effective January 1, 1999, under a plan of merger, with the approval of the Maryland Insurance Administration, the company's ultimate parent, USF&G Corporation, merged with St. Paul Fire and Marine Insurance Company (Fire & Marine), a Minnesota corporation. As a result of this merger, the company became a direct wholly owned subsidiary of Fire & Marine, with St. Paul as its ultimate controlling entity.

On September 18, 2001, the company was acquired by Old Mutual plc ("Old Mutual"), a London-based financial services company, which the Maryland Insurance Administration approved on September 21, 2001. As a result of the acquisition, the Company became a direct, wholly owned subsidiary of Old Mutual U.S. Life Holdings, Inc. ("OMUSLH"), a Delaware holding company that is ultimately owned by Old Mutual. The listed purchase price was US$635 million.

On December 31, 2002, the Maryland Insurance Administration approved a reorganization plan within the Old Mutual plc holding company system. Old Mutual plc created a new Texas-domiciled life insurance company, Omnia Life Insurance Company, Inc. ("Omnia"), and all of the outstanding common stock of the company was contributed to Omnia by the company's parent, OMULSH. As a result of the reorganization, the Company became a direct, wholly-owned subsidiary of Omnia.

Effective January 1, 2007, the company's board of directors approved a resolution to amend its charter to change its name to OM Financial Life Insurance Company. This name change was submitted and approved by the State of Maryland Department of Assessments and Taxation and the Administration, effective January 1, 2007.

On January 16, 2009, the Securities and Exchange Commission("SEC") issued Rule 151A, claiming indexed annuities should be regulated as securities and should only be sold by registered representatives. A lawsuit was filed on the same day challenging the SEC's ability to regulate fixed indexed annuities. Legislation was also introduced in Congress to exempt these annuities from securities regulation. Management of OM Financial Life Insurance actively participated in industry opposition to the proposal.

On April 6, 2011, Old Mutual announced the completion of the sale of its life and annuity business to the Harbinger Group. Harbinger expressed its intention to use cash flow from the company to fund future acquisitions for the conglomerate. Harbinger appointed Lee Launer, a former senior executive of MetLife to run the company as CEO. At that time, "OM Financial Life Insurance Company" changed its name back to "Fidelity & Guaranty Life Insurance Company".

In 2013, the company announced a move of its headquarters to Des Moines, Iowa, citing a lower cost of business and a desire to operate under a similar regulator as rival companies. The company launched an initial public offering in late 2013. In October 2014, the company hired Chris Littlefield, former CEO of Aviva USA, as President of the company. The company subsequently appointed him CEO in April 2014. In August 2013, Fidelity & Guaranty Life filed Form S-1 with the U.S. Securities and Exchange Commission expressing its intention to complete an initial public equity offering.

In November 2015, Fidelity announced an agreement to sell the company to the Chinese insurance firm Anbang Insurance for a fee of around $1.57 billion. But the deal was terminated and the company was sold to CF Corp in 2017. CF Corp rebranded as FGL Holdings.

In December 2018, FGL Holdings appointed Christopher Blunt as the President & CEO of the company, replacing Christopher Littlefield. In 2019, FGL Holdings rebranded Fidelity & Guaranty Life as F&G, seeking to distinguish the company from other companies with Fidelity in their names. Later in 2019, FGL Holdings agreed to be acquired by the previously-unrelated Fidelity National Financial, a deal that closed in 2020. In December 2019, the company announced that it will move its headquarters from Two Ruan building at 601 Locust St. to leased space in 801 Grand which is the tallest building in downtown Des Moines. 

In December 2022, the company returned to public trading following a 15% stock issuance.

Business

Policies are offered in every state and the District of Columbia; in New York, products are offered through a wholly owned subsidiary, Fidelity & Guaranty Life Insurance Company of New York. The company focuses on the sale of individual life insurance products and annuities, which include deferred annuities (fixed indexed and fixed rate annuities) and immediate annuities.