How New American Funding’s insurance arm saves DTI-tight loans

Record-high property insurance premiums are pinching debt-to-income ratios and forcing lenders to seek alternative solutions, but, for the first time in years, there is hope for the future.

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The average single-family borrower paid almost 80% more for insurance in the second quarter compared to the start of 2020, according to the Intercontinental Exchange’s latest mortgage monitor report. The spike has pushed some borrowers past Fannie Mae and Freddie Mac’s maximum debt-to-income ratio, as lenders look for ways to save the loan.

New American Funding launched its own insurance agency, NAF Insurance Services, as a result of rising insurance costs. In the case that a borrower’s ratio doesn’t fit under the government-sponsored entities’ limit, New American can work with its network of 60 insurance carriers to find a premium that fits a homebuyer’s budget and gets them approved, Phil Miller, senior vice president of strategic partnerships at New American and chief operating officer at NAF Insurance, told National Mortgage News.

NAF Insurance customers save $719 on average, Miller said.

Borrowers paid a record $209 per month for insurance in the second quarter, which accounted for 9.6% of the average monthly mortgage payments. It varies widely by market, with insurance making up 24.3% of mortgage dues in New Orleans and just 4.3% in San Jose, according to the report.

Property insurance costs rose 8.7% annually, but the pace of growth slowed, easing from an 11.4% year-over-year increase in the first quarter and a 15.1% jump at the end of 2024. Coverage limits, which were up 5.5%, accounted for about two-thirds of the past year’s spike, while the cost per $1,000 of coverage accelerated 3%. This was different from 2024, when repricing drove cost growth, the release said.

“Property insurance has been a fast-growing component of the monthly mortgage payment, but this quarter’s data shows the pace of increase is finally slowing,” said Andy Walden, head of mortgage and housing market research at ICE, in the press release Thursday. “The 1.8% quarterly gain we saw in Q2 is the smallest since we began tracking this metric.”

The minimal growth is largely due to carriers reentering the market. The average number of quotes available per person rose 27% from 2025 and 74% since its low point two years ago, giving homeowners more opportunities to compare pricing and coverage, according to Matic’s mid-year trends report.

Cost trends also showed regional volatility. Greenville, South Carolina, at 15.8%, Honolulu, at 14.7%, and Minneapolis, at 13.1%, posted the largest annual increases across the country. Many of the largest jumps occurred in markets recently impacted by natural disasters, such as hurricanes, wildfires and hail. Meanwhile, Miami and New Orleans, the nation’s two most expensive insurance markets, were among the smallest yearly spikes, according to the report.

Switching carriers provided relief for homeowners, reducing insurance payments by an average of 6.6%, the largest savings since ICE began tracking the data in 2013. Switchers saved $440 a year compared to their counterparts, who saw premiums increase 10.4%, while also maintaining favorable terms, with deductibles dropping 1.4% and coverage limits rising 7.3%, the report found.