Month: December 2017

Newsletter: December 2017

Posted on by dcadmin

As 2017 wraps up, there continue to be many developments in the housing finance system. On Capitol Hill, recent hearings before the House Financial Services Committee’s (HFSC) Subcommittee on Housing and Insurance featured top experts tackling the most pressing issues in the housing market. USMI Chairman Patrick Sinks (who is also CEO of Mortgage Guaranty Insurance Corp.) testified to discuss the importance of increasing private capital in the housing finance system as Congress considers reform proposals. Ginnie Mae Acting President Michael Bright also testified and touted the value of private capital in the housing market, as well as the value of front-end risk sharing, such as with private mortgage insurance (MI). Separately, HFSC Chairman Jeb Hensarling expressed support for moving forward with bipartisan housing reform. In another notable development on the Hill, the U.S. Senate Banking Committee gave its bipartisan approval for Brian Montgomery to be President Trump’s Federal Housing Administration (FHA) Commissioner. His nomination now goes to the full Senate for consideration. Another significant FHA development is the announcement that its loan limit would increase by roughly 7 percent. America’s Homeowner Alliance Managing Director Tino Diaz wrote a thoughtful op-ed about the FHA’s role in the housing finance system. Diaz’s op-ed highlights the need for the FHA to keep its important risk safeguards in place despite Congressional legislation that seeks to weaken these protections. 

  • USMI Chairman Patrick Sinks Testifies Before Congress in Housing Finance Reform Hearing—Part IV. This week, USMI Chairman and MGIC CEO Patrick Sinks testified on behalf of USMI in front of the HFSC Subcommittee on Housing and Insurance in a hearing entitled “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV.” Sinks highlighted the role that private MI has played in the housing finance system, and discussed the MI industry’s performance through the Great Recession, the key improvements made by the industry that make it more resilient going forward, and the industry’s ability to play a larger role in a reformed system. In addition, Sinks proposed specific principles for housing finance reform, lessons that should be applied to all market participants, and recommendations to increase the role of private capital in the housing finance system to further protect taxpayers and ensure borrowers’ continued access to affordable and prudent low-down payment mortgage credit.
     In a statement, USMI President and Executive Director Lindsey Johnson said: “Private MI has been an invaluable piece of the housing finance system for a long time, decades longer than any other low down payment model being tested. Fortunately, our industry is strong and ready to shoulder an even greater responsibility in the system moving forward. We appreciate Congress’ work to address long overdue reforms to the housing finance system and USMI members look forward to continuing and enhancing the credit risk protection MI provides to shield taxpayers from mortgage credit risk and promote homeownership across the country.”
  • House and Senate Seem Poised to Advance Bipartisan Housing Finance Reform. Speaking at a housing finance reform event hosted by the National Association of Realtors (NAR) and S&P, HFSC Chairman Jeb Hensarling (R-TX) expressed support for moving ahead with bipartisan housing finance reform. Alluding to the likely direction that Republicans may pursue for reform, Chairman Hensarling touted the Ginnie Mae model, which builds off proposals promoted by former Ginnie Mae President Ted Tozer, former Federal Housing Finance Agency (FHFA) Acting Director Ed DeMarco, and current Ginnie Mae Acting President Michael Bright.Hensarling specifically said: “I don’t want a government guarantee, I don’t think we need a government affordable housing program but in surveying the political landscape I know they will exist in any bipartisan effort.”  Demonstrating bipartisan support for elements of housing finance reform, Rep. Dan Kildee (D-MI) said, “This is an area of policy where I think the divisions that manifest on this committee might be able to be overcome and I want to encourage the leadership of this subcommittee to continue on that path; as long as we know the direction we are going I think there is enough common ground for us to try to knit together some policy that we can all work together on… in a bipartisan fashion.”
  • Acting Ginnie Mae President Michael Bright Touts Private MI and Increased Risk Sharing.  Ginnie Mae’s Acting President Michael Bright testified before the HFSC in a hearing entitled “Sustainable Housing Finance: The Role of Ginnie Mae in the Housing Finance System.” During his testimony, Bright discussed potential Ginnie Mae reforms, the entity’s financial portfolio, as well as VA loan refinancing. Importantly, Bright was asked several questions by Rep. Ed Royce (R-CA) on the role of private MI in the housing finance system.Bright acknowledged that credit risk transfers at Fannie Mae and Freddie Mac (the “GSEs”) are bringing more private capital into the housing finance system and agreed with Rep. Royce that Ginnie Mae and the GSEs have the legal authority to do more front-end risk sharing. Bright also said that he believes credit risk transfers are the biggest success story in the secondary mortgage market in the last five years, and that anything that can be done to lock in those gains is smart policy.
  • FHA Commissioner Nominee Brian Montgomery Approved by Senate Banking Committee. The U.S. Senate Banking Committee approved Brian Montgomery to be FHA Commissioner in a bipartisan vote of 18 to 5. Montgomery, a longtime housing finance expert who previously served as FHA Commissioner under President George W. Bush, will now be considered by the full Senate for a confirmation vote. Today, 46 housing organizations sent a letter to House and Senate leaders urging that the Senate bring Montgomery’s nomination to the Senate Floor for a vote as soon as possible.USMI has specifically applauded Montgomery’s views that private capital should play a leading role in guaranteeing low down payment mortgage credit risk to protect U.S. taxpayers and the federal government, as well as his previous statement that the FHA “should never take the place of the private sector first-loss solution provided by private mortgage insurers.”
  • America’s Homeowner Alliance Publishes Op-Ed on Need to Retain FHA Risk Safeguards. AHA Managing Director Tino Diaz recently published an op-ed calling for the preservation of FHA risk safeguards in the housing finance system. In his op-ed, Diaz highlights the critical role the FHA has played serving underserved borrowers in the housing finance system, but calls attention to recent misguided efforts to change the FHA’s successful risk protections. Diaz specifically discusses Congressional legislation introduced that seeks to eliminate the FHA’s life of loan mortgage insurance premium (MIP) policy, which is critical to protecting U.S. taxpayers and the federal government from risky FHA loans, all of which are 100 percent government-backed.The op-ed comes the same week the FHA announced that its loan limits will increase in nearly all zip codes across the country—increasing roughly seven percent to $679,650 in many high-cost areas. Diaz’s op-ed takes on even greater importance in light of the FHA’s recent annual report to Congress, which showed the fiscal health of the FHA’s Mutual Mortgage Insurance Fund in a weaker financial position than it was last year and woefully undercapitalized compared to its private sector counterparts. As such, any changes to the FHA’s life of loan policy or reductions to its MIP collection would expose taxpayers and the government to increased mortgage credit risk.

Testimony: Chairman Patrick Sinks Before Congress on Mortgage Insurance and Sustainable Housing

Posted on by dcadmin

Sinks Highlights Importance of Private Mortgage Insurance In Helping Borrowers Qualify for Low Down Payment Mortgages While Protecting Government Against Risk

WASHINGTON — U.S. Mortgage Insurers (USMI) Chairman and Mortgage Guaranty Insurance Corporation (MGIC) CEO Patrick Sinks today testified on behalf of USMI in front of the House Financial Services Committee’s Subcommittee on Housing and Insurance in a hearing entitled “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV.”

In his testimony, Sinks highlighted the long and successful role that private mortgage insurance (MI) has played in the housing finance system to help homebuyers responsibly purchase homes with affordable low down payments – all while protecting U.S. taxpayers and the federal government from undue mortgage credit risk. Sinks also discussed the MI industry’s performance through the Great Recession and the key improvements made by the industry that make it more resilient going forward.

“Over the last 60 years, private MI has helped more than 25 million families attain homeownership in a prudent and affordable manner. MI reduces taxpayer risk exposure by transferring a substantial portion of mortgage credit risk to companies backed by private capital. Mortgage insurers covered more than $50 billion in claims since Fannie Mae and Freddie Mac entered conservatorship resulting in substantial savings to taxpayers,” said Sinks.

In addition to the important role the MI industry plays in the housing finance system, Sinks proposed specific principles for housing finance reform and lessons that should be applied to all market participants, as well as recommendations to increase the role of private capital in the housing finance system to further protect taxpayers and the government.

Acknowledging that there should be a diverse set of participants in the future to assume and protect against all mortgage credit risk ahead of an explicit government guaranty, Sinks noted that, “We believe much more can be done to reduce the risk to the federal government and make taxpayer risk exposure even more remote without jeopardizing the ability for creditworthy borrowers to continue to buy a home with mortgage financing. This includes a greater reliance on the mortgage insurance model where private capital stands in front of the government and taxpayers.”

In an August 2017 report, the Urban Institute found that GSE loans with MI consistently have lower loss severities than those without MI. In fact, the report shows that for nearly 20 years, loans with MI have exhibited lower loss severity each origination year. The Urban analysis states that “for 30-year fixed rate, full documentation, fully amortizing mortgages, the loss severity of loans with PMI is 40 percent lower than [loans] without.”

USMI President and Executive Director Lindsey Johnson echoed Sinks’ Congressional testimony today: “Private MI has been an invaluable piece of the housing finance system for a long time, decades longer than any other low down payment model being tested. Fortunately, our industry is strong and ready to shoulder an even greater responsibility in the system moving forward. Underscoring the strength of MI, the industry paid more than $50 billion in claims since the financial crisis and has implemented new higher robust capital standards. We appreciate Congress’ work to address long overdue reforms to the housing finance system and USMI members look forward to continuing and enhancing the credit risk protection MI provides to shield taxpayers from mortgage credit risk and to promote homeownership across the country.”

###

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.