Month: June 2020

Statement: Updates to Private Mortgage Insurer Eligibility Requirements (PMIers)

Posted on by dcadmin

WASHINGTON—U.S. Mortgage Insurers (USMI) President Lindsey Johnson today issued the following statement on guidance provided by the Federal Housing Finance Agency (FHFA) and the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to the Private Mortgage Insurer Eligibility Requirements (PMIERs), PMIERs 2020-01, effective June 30, 2020. PMIERs are a set of operational and risk-based capital requirements implemented in 2015 and updated in 2018 for private mortgage insurance (MI) companies to be approved to insure loans acquired by Fannie Mae and Freddie Mac.

“USMI supports the actions taken by federal policymakers, particularly the FHFA, to stabilize the economy and provide assistance to those who have been impacted by the COVID-19 pandemic,” said USMI President Lindsey Johnson. “USMI’s member companies are well-positioned to support the FHFA and GSEs’ efforts to ensure that homeowners who have been affected by COVID-19 are able to stay in their homes and maintain a safe and secure environment for their families.”

Today, USMI member companies are well capitalized, collectively holding more than $4.6 billion in excess of the minimum required assets as of March 31, 2020.  The private MI industry provides dedicated entity-based capital support to the U.S. housing market and is uniquely positioned to continue serving as strong credit risk protection for the GSEs and taxpayers, and as a source of low down payment lending during COVID-19 and through the recovery.

The new PMIERs 2020-01 guidance provides, among other changes, additional clarity and special consideration for the risk-based treatment of loans affected by COVID-19. Under the 2018 update, a capital factor was introduced to differentiate mortgages subject to a GSE forbearance plan done in response to a Major Disaster Declaration from the Federal Emergency Management Agency (FEMA) due to natural disasters. This type of forbearance is often used for natural disasters such as hurricanes or other shorter-term disasters that occur in a specific geographic area, and generally have a definite period for the event. However, due to the unprecedented nature of the COVID-19 disaster, including its national scope and the ongoing duration of the health and economic effects, the PMIERs language needed additional clarity, which we are pleased FHFA, Fannie Mae, and Freddie Mac understood and provided.

“Through the combination of the industry’s entity-based equity capital, use of credit risk transfer, and strong underwriting and risk management, the private MI industry is well positioned to continue to serve as a source of strength in the housing finance system during this pandemic and the ensuing recovery,” continued Johnson.  

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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.

Statement: CFPB’s Proposed Rules on The General QM Loan Definition and Extension of the GSE Patch

Posted on by dcadmin

WASHINGTON — U.S. Mortgage Insurers (USMI) President Lindsey Johnson issued the following statement on the Consumer Financial Protection Bureau’s (CFPB) Notices of Proposed Rulemaking (NPRM) on the general qualified mortgage (QM) definition under the Truth in Lending Act (Regulation Z) and the extension of the government sponsored enterprises (GSEs) Patch:

“USMI appreciates the CFPB assessing what has happened in the marketplace since the general QM loan definition and temporary QM category (“GSE Patch”) were first implemented in 2014. Since then, market participants have originated mortgage loans with far greater diligence to ensure consumers have a reasonable ability-to-repay (ATR) and with more robust underwriting standards that have resulted in a much stronger housing finance system. The GSE Patch has also played a critical role in maintaining credit availability in the conventional market. As takers of first-loss mortgage credit risk with more than six decades of expertise and experience underwriting and actively managing that risk, USMI members understand the need to balance prudent underwriting with a clear and transparent standard that maintains access to affordable and sustainable mortgage finance credit for home-ready borrowers. USMI looks forward to reviewing and submitting comments on both rules.”

In September 2019, USMI submitted comments on the CFPB’s advance NPRM on the QM definition, offering specific recommendations for replacing the current GSE Patch to establish a single transparent and consistent QM definition in a way that balances access to mortgage finance credit and proper underwriting guardrails to ensure consumers’ ATR.

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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: New Report Finds Low Down Payment Mortgage Lending Increased in 2019, Meanwhile Saving for a 20 Percent Down Payment Could Take 21 Years

Posted on by dcadmin

WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, today released its annual state-by-state report on low down payment mortgage lending. The report finds the number of low down payment loans backed by private MI increased 22.9 percent in 2019; meanwhile saving for a 20 percent down payment may take potential homebuyers 21 years to save — three times the length of time it could take to save a 5 percent down payment. USMI also found that the top five states for low down payment home financing with private MI were Texas, California, Florida, Illinois, and Ohio.

“Last year, over 1.3 million homeowners purchased a home or refinanced an existing mortgage with less than a 20 percent down payment using private mortgage insurance,” said Lindsey Johnson, president of USMI. “Given the current economic environment and the desire of many people to keep more cash on-hand, low down payment loans are more important than ever. Loans backed by private MI are a great option as a time-tested means for accessing homeownership sooner while still providing credit risk protection and stability to the U.S. housing system.”

The report examines the number of borrowers helped, the percentage of borrowers who were first-time homebuyers, average loan amounts, and average FICO credit scores. USMI also calculates the number of years to save a 20 percent versus a 5 percent down payment for each state plus the District of Columbia.

Key findings from the report:

  • It could take 21 years on average for a household earning the national median income of $63,179 to save for a 20 percent down payment (plus closing costs), for a $274,600 single-family home, the national median sales price.
  • The wait time decreases to 7 years with a 5 percent down payment insured mortgage — a nearly 67 percent shorter wait time at the national level.
  • In 2019, the number of homeowners who qualified for a mortgage because of private MI reached over 1.3 million, nearly 60 percent of purchase mortgages went to first-time homebuyers, and more than 40 percent had annual incomes below $75,000. The average loan amount purchased or refinanced with MI was $269,072.
  • Over the last five years, the role of private MI in the low down payment sector increased from 34.8 percent of the insured market in 2015 to 44.7 percent in 2019.

The below table shows the top five states in which MI was used by borrowers to purchase or refinance homes in 2019.

State Number of Borrowers Helped with Private MI First-Time Homebuyers
Texas 105,158 56 percent
California 103,120 68 percent
Florida 88,360 55 percent
Illinois 58,654 64 percent
Ohio 51,167 59 percent

Private MI serves as a bridge for creditworthy homebuyers to qualify for home financing despite a low down payment. It provides protection against mortgage default credit risk and is structured to protect the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, in the conventional mortgage market.

The complete report is available here, along with fact sheets for all 50 states and the District of Columbia.

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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.