Month: June 2016

Statement: FHFA Credit Risk Transfer Progress Report and RFI

Posted on by dcadmin


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For Immediate Release

June 30, 2016

Media Contacts

Laura Capicotto (202) 777-3536 (lcapicotto@clsstrategies.com)

 

USMI Statement on FHFA Credit Risk Transfer Progress Report and RFI

The Federal Housing Finance Agency (FHFA) has released a Progress Report and Request for Input (RFI) on Single-Family Credit Risk Transfers as a follow-up to the release of the 2016 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions.  U.S. Mortgage Insurers (USMI) welcomes the opportunity to work with FHFA and the government sponsored enterprises (GSEs) on specific steps the GSEs need to take to increase the amount and levels of credit risk transferred.  Front-end risk sharing with deeper coverage using private mortgage insurance (MI) will address existing shortcomings in the GSEs’ credit risk transfer efforts and offers substantial benefits for taxpayers and borrowers.

“The MI industry has taken substantial steps to be well positioned to provide more private capital in front of the GSEs’ risk exposure with increased and enhanced capital and reliability standards.  MIs are well positioned to do more right now to protect taxpayers and help borrowers,” said Lindsey Johnson, President and Executive Director of USMI.  “In the absence of comprehensive reform, we should explore many options in the credit risk share market, with greater balance among them.  With three years of largely back-end risk sharing transactions, the potential benefits of front-end risk sharing have not been realized.  Unfortunately, the RFI inadequately portrays the role private mortgage insurers (MIs) play in assuming credit risk and the steps MIs have taken to strengthen capital and counterparty standards (click here for MI reliability fact sheet).  The RFI discusses many risks but neither provides quantitative analysis of the size and relative importance of those risks, nor proposes or requests proposals for ways to quantify those risks.  A strong case exists for expanding mortgage insurance coverage down to 50 percent of the value of the loan and doing it on the front-end, before the risk ever reaches the GSEs’ balance sheets, as part of the next phase of experimentation.”

USMI looks forward to commenting on the following issues as part of the RFI process:

  • The need for a balance of methods to offload the mortgage risk concentrated at the GSEs and to enhance housing finance reform possibilities;
  • The need for equivalency of standards to be consistently applied to all sources of housing finance and credit enhancement to ensure there is no regulatory arbitrage;
  • The need to address pricing and modeling transparency;
  • The need to ensure that a broad set of lenders have equitable access to the system; and
  • The need to have risk sharing partners that will stay in the market in good times and bad, including during another market downturn when the housing finance system is under stress.

Front-end risk sharing via deeper cover MI transfers credit risk to MIs at the time the loan is originated, which reduces risk before it ever gets to the GSEs and provides real time price transparency so that any savings can be passed on to borrowers.

“While we understand the Enterprises’ consideration of exposure to all counterparties, we think increased private capital by strong counterparties further reduces taxpayer risk and should be encouraged.  The MI industry is ready and prepared to do more,” said Johnson.  “MIs have raised $9 billion in new capital since the financial crisis, and are well positioned to raise additional capital to meet demand.”

MIs covered roughly $50 billion in claims to the GSEs since conservatorship.  Throughout the financial crisis, USMI members never stopped paying claims, never received any bailout money from the Federal government, and continued to write new insurance.  In fact, since the crisis, MIs have paid all valid claims, with 96 percent paid in cash and the remainder due over time.  MIs have materially increased their claims paying ability in both good and bad economic times due to new higher capital standards under the Private Mortgage Insurance Eligibility Requirements (PMIERs).  All MIs have met or exceeded PMIERs requirements as of December 31, 2015.

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U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.

 

Letter: USMI Joins Call for Reduction in Unnecessary GSE Fees on Borrowers

Posted on by dcadmin

For Immediate Release

June 22, 2016

Media Contacts

Laura Capicotto (202) 777-3536 (lcapicotto@clsstrategies.com)

 

USMI Joins Call for Reduction in Unnecessary GSE Fees on Borrowers

Consumer and Industry Groups United for Lower LLPAs

(June 22, 2016) – Today, U.S. Mortgage Insurers (USMI) joined 25 financial services and residential real estate trade associations and consumer groups, including the National Association of Realtors, Mortgage Bankers Association, National Association of Home Builders, Credit Union National Association, as well as the Center for Responsible Lending and Consumer Federation of America, in a letter to Federal Housing Finance Agency (FHFA) Director Mel Watt calling for Fannie Mae or Freddie Mac (the government sponsored enterprises, or “GSEs”) to reduce or eliminate loan level price adjustments (LLPAs) charged by the GSEs.

“Housing credit remains too tight and too many qualified borrowers are unable to get access to affordable mortgage credit, in large part because the GSEs are still charging LLPAs eight years after the financial crisis,” said Lindsey Johnson, USMI President and Executive Director.  “Low down-payment borrowers are being double charged for the risk being assumed by private mortgage insurance (MI).  These additional fees are particularly burdensome for low- and moderate-income and first-time homebuyers.  It’s time borrowers get the full benefit of the credit risk transferred away from the GSEs to private capital in the form of MI.”

For a copy of the joint letter, click here.

Guaranty fees (or “G-fees”) are fees charged by the GSEs on individual loans they purchase to cover any losses in the event of a default.  LLPAs are additional fees first introduced by the GSEs in 2008, during the financial crisis.  Borrowers often pay LLPAs in the form of higher mortgage rates.  LLPAs continue to be charged nearly eight years later despite significant improvement in the credit quality of GSE-backed loans and strengthened participants in the mortgage finance industry, including lenders and private mortgage insurers.  In fact, GSE fees, including LLPAs, are currently two and half times higher than during the mortgage crisis, while the cumulative default rate has decreased from 13.7 percent to near zero.

Low down-payment loans purchased by the GSEs are already covered by MI, which provides the GSEs with substantial protection against first losses on these loans, reducing GSE and taxpayer risk exposure.  Mortgage Insurers (MIs) covered more than $50 billion in claims to the GSEs since conservatorship, resulting in substantial savings to taxpayers.  MIs have raised $9 billion in new capital since the financial crisis and implemented the Private Mortgage Insurers Eligibility Requirements (PMIERs), a new, rigorous set of capital standards established by the GSEs.  The MI industry covers first loss mortgage credit risk ahead of the taxpayers and is ready to do more.  Accordingly, FHFA should ensure that the GSEs price credit risk in a manner that is transparent and that reduces arbitrary or unnecessary borrower costs.

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U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.

 

Press Release: USMI Announces New Housing Finance Reform Principles

Posted on by dcadmin

USMI Announces New Housing Finance Reform Principles

Calls for Private Capital to Absorb All Expected Credit Losses & Protect Taxpayers

(June 6, 2016) – U.S. Mortgage Insurers (USMI) today announced a new set of housing finance reform principles to help evaluate and shape reform efforts aimed at ensuring that American consumers have access to mortgage credit while better shielding taxpayers from housing-related risks.

“These principles set forth a sensible roadmap for much needed reform to put the housing finance system on a more sustainable path.  Policymakers should keep the features that work well while reducing risks at the GSEs as much as possible,” stated Lindsey Johnson, USMI President and Executive Director.

USMI announced the following principles for reform:

  • Protect Taxpayers. Private mortgage insurance (MI) and other forms of private capital should absorb all credit losses in front of any government guaranty.
  • Promote Stability. A goal of the reformed system should be to promote stability in housing finance.
  • Ensure Accessibility. A reformed system should ensure broad access to mortgage finance for creditworthy borrowers and participation by lenders of all sizes and types.
  • Foster Transparency. There should be a consistent, transparent, and coordinated approach to the federal government’s housing policy among all government agencies and entities.

New polling also shows strong public support for housing finance reform efforts that rely on private capital to assume more of the risk currently borne by the GSEs.  Among the findings:

  • Half of respondents (49%) believe the government is not doing enough to reduce the risks of another housing-related taxpayer bailout;
  • Most (48%) believe the private sector should bear the responsibility for the risk of losses on bad loans;
  • The majority (54%) would support a law requiring more private capital – such as additional mortgage insurance – to reduce the amount that taxpayers have to pay if borrowers default on their mortgage; and
  • 71% are concerned about the return of loans with features (including interest only or zero down) that independent government reports and third-party analysts have noted contributed to the mortgage crisis.

A complete description of the USMI housing finance reform principles can be found here and a summary of the polling administered by Morning Consult on behalf of USMI between October 8-12, 2015 and April 7-9, 2016, can be found here.

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U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers.  Mortgage insurance (MI) offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.

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Press Release: Private Mortgage Insurance Helped More Americans Become Homeowners in 2015

Posted on by dcadmin

For Immediate Release

June 1, 2016

Media Contacts

Laura Capicotto 202-777-3536 (lcapicotto@clsstrategies.com)

Private Mortgage Insurance Helped More Americans Become Homeowners in 2015

USMI Data Highlights Consumer Benefits During National Homeownership Month

(June 1, 2016) – Private mortgage insurance (MI) helped approximately 740,000 homeowners in 2015, a more than 18 percent increase over 2014, U.S. Mortgage Insurers (USMI) today announced in conjunction with National Homeownership Month.  This growth mirrors the positive national trend showing total mortgage borrowing reaching a four-year high.

“As we celebrate Homeownership Month, USMI is proud that private mortgage insurance is an essential part of the mortgage finance system that helped even more borrowers become homeowners last year” said Lindsey Johnson, USMI President and Executive Director.  “MI is a great option to help borrowers address high down payment requirements, which can be one of the biggest hurdles to homeownership.  Consumers should know about all the options, including the benefits of MI, before making one of the most significant financial decisions of their lives.”

MI Makes Homeownership Affordable

MI has helped millions become homeowners by enhancing their ability to obtain a mortgage in an affordable way.

There are a number of consumer benefits from MI:

  • MI Provides Savings to Borrowers – Borrowers with above average credit scores can save as much as $8,000 over five years with private MI compared to FHA insurance, according to WalletHub’s 2016 Mortgage Insurance Report.
  • MI Helps First-Time Homebuyers – Nearly 50 percent of loans covered by MI in 2015 were for first-time homebuyers and more than 40 percent were borrowers with incomes below $75,000. In 2015, MI helped approximately 740,000 homeowners purchase or refinance a mortgage.  For more data, visit the USMI data-snapshot.
  • MI is Cancelable – Private MI paid for by the borrower can be cancelled when the borrower pays down the mortgage to 78 percent of the home value. Because borrowers can stop paying private MI premiums at a certain point, this can lead to real savings over the life of their loan.  With home value appreciation, a borrower may be able to cancel MI even sooner.  For more information on MI cancelability, visit our comparison of private mortgage insurance and FHA insurance.
  • MI is Tax Deductible – MI premiums are treated as “mortgage interest” and are tax deductible for many borrowers. According to the IRS, 4.7 million taxpayers benefited from deductions for MI in 2013, with an average deduction of $1,387.  For more data, visit the USMI data-snapshot.
  • MI Protects Taxpayers from Another Bailout – Because private MI is backed by private capital, if the borrower defaults, MI covers the first losses thus reducing the risk to government – and ultimately taxpayers – of another bailout. Independent polling shows Americans support reducing taxpayer exposure through greater reliance on private capital.

“Homeownership remains an important goal for most Americans, creating long-term value for individuals and their communities.  USMI members are proud to help millions of Americans become homeowners,” said Johnson.  “A strong and vibrant private Mortgage Insurance industry plays an important role in facilitating homeownership for millions of Americans, and MI is prepared to do more.”

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U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers.  Mortgage insurance (MI) offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.

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