Milliman performed an independent analysis of the treatment of private mortgage insurance (PMI) within the Federal Housing Finance Agency’s (FHFA) Enterprise Regulatory Capital Framework (ERCF). The ERCF establishes the regulatory capital requirements for government sponsored enterprises (GSE) Fannie Mae and Freddie Mac. PMI is recognized within the framework as a credit enhancement that reduces the GSEs’ required capital on insured single-family mortgage exposures. This report, commissioned by U.S. Mortgage Insurers (USMI), summarizes three components of Milliman’s analysis: a review of the ERCF’s counterparty haircut methodology, quantification of the ERCF capital reduction provided by PMI to the GSEs, and measurement of the historical loss reduction provided by PMI to the GSEs.

Key findings:

• Counterparty haircut analysis: The ERCF applies a counterparty haircut that reduces the capital relief provided to loans with loan-level credit enhancement based on attributes of the counterparty.
• ERCF capital credit for mortgage insurance: When applying the ERCF risk-based capital rules to 28.2 million active GSE single-family loans as of July 31, 2025, PMI reduces the GSEs’ gross risk-based capital requirement from $211.5 billion to $182.5 billion—a portfolio-wide reduction of $29.0 billion, or 14%.
• ERCF comparison to historical loss reduction: Across 386,766 GSE loans originated from 1999 through 2024 that were originated with PMI and subsequently experienced a loss event, claim payments totaled $12.8 billion against $30.9 billion of total realized credit losses, meaning PMI absorbed 41% of losses on the analyzed population.

This report was commissioned by U.S. Mortgage Insurers (USMI).