Month: May 2022

Statement: Senate Confirmation of Sandra Thompson as FHFA Director

Posted on by Chloe Plefka

WASHINGTON — Lindsey Johnson, President of the U.S. Mortgage Insurers (USMI), today issued the following statement on the U.S. Senate’s bipartisan confirmation of Sandra Thompson to serve as Director of the Federal Housing Finance Agency (FHFA):

“USMI and our member companies congratulate Sandra Thompson on her bipartisan Senate confirmation to serve as the next FHFA Director. Thompson has been serving as the agency’s Acting Director since June 2021 and understands the importance of ensuring the safety and soundness of the GSEs, Fannie Mae and Freddie Mac, and the housing finance system. We are confident that she will continue to help instill strength into the housing finance system as families face barriers to homeownership due to severely limited supply and record home price appreciation. We look forward to continuing to work closely with Director Thompson in seeking ways to establish a more collaborative, transparent, and consistent housing policy that ensures homebuyers have affordable and prudent options for low down payment mortgage finance credit while also protecting taxpayers and the U.S. government from undue risk.”

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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: Private Mortgage Insurers Transferred Over $55 Billion in Risk on Nearly $2.8 Trillion of Active Coverage at Year-End 2021

Posted on by Chloe Plefka

WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, today announced the industry has transferred over $55 billion in risk on nearly $2.8 trillion of insurance-in-force (IIF) from 2015 through 2021. The industry’s use of MI credit risk transfer (MI-CRT) reduced volatility in the business and brought more sources of private capital to the housing finance market. MI-CRT, combined with enhanced capital standards required by the government-sponsored enterprises (GSEs) and the Federal Housing Finance Agency (FHFA), has transformed the industry from a cyclical business to a more stable, long-term manager of mortgage credit risk.

“While some housing market participants either paused or reduced their CRT activities during the past two challenging years, the private MI industry continued to execute CRT transactions,” said USMI President Lindsey Johnson. “This underscores the confidence investors and reinsurers have in the private MI industry in terms of the critical role we play in helping millions of people access affordable mortgage credit while taking a disciplined approach to writing new business.”

From 2015 through 2021, the private MI industry issued 49 insurance-linked notes (ILNs), transferring $20 billion of risk exposure on more than $2 trillion of notional mortgages to capital market investors, and completed 25 quota share (QSR) and excess of loss (XOL) reinsurance transactions, ceding $35 billion of additional risk to the global reinsurance markets. That is $55 billion of risk transferred off private mortgage insurers’ balance sheets, meaning additional capacity to support new borrowers. In 2021, the industry insured $1.4 trillion of mortgages, including $1.2 trillion of mortgages backed by the GSEs.

Johnson recently discussed MI-CRT with National MI President and CEO Adam Pollitzer.

“MI-CRT is central to how the private MI industry manages credit risk. The tools we use—insurance-linked notes offerings, excess of loss reinsurance treaties, and quota share reinsurance agreements—each serve to absorb risk and loss in stress scenarios,” said Pollitzer. “CRT enhances our counterparties’ strength, bolsters and diversifies our funding profile beyond entity-based equity capital, and allows us to write more business and support more borrowers with greater efficiency. Every dollar of risk transferred through CRT opens another dollar of mortgage volume that we can support for new borrowers.”

The private MI industry complies with a set of operational and capital standards known as the Private Mortgage Insurance Eligibility Requirements (PMIERs), which were developed and are periodically updated by the GSEs and FHFA. At the end of 2021, the private MI industry held a collective $25.3 billion qualifying PMIERs funding, which represented a 170% sufficiency ratio—holding 70% more capital than the required regulatory threshold.

“The private MI industry is better positioned today than ever before to support borrowers in need and provide private capital solutions that insulate lenders, the GSEs, and ultimately taxpayers from risk and loss in the event of an economic downturn,” said Pollitzer. “Over the last 10 years, the terms of our coverage, the regulatory framework governing our actions, our funding requirements and capital position, our underwriting standards, and the way we approach evaluating risk, pricing policies, and managing our tail exposure have all fundamentally changed. And the performance of the private MI industry through the arc of the pandemic serves as a highlight.”

The MI industry has enabled more than 37 million families to access affordable, low down payment mortgages in its 65-year history. In 2021, the industry enabled nearly 2 million borrowers to access mortgage finance credit and supported $585 billion in mortgage originations. Nearly 60 percent of these insured loans went to first-time homebuyers, over 40 percent went to borrowers with incomes below $75,000, and the average loan amount for a mortgage with private MI was approximately $310,000.

USMI worked closely with federal policymakers, industry groups, and consumer organizations to support and advocate for low down payment homebuyers and homeowners throughout the year. The organization sent letters and released statements in support of bipartisan and bicameral legislative initiatives to make permanent the ability of homeowners to deduct MI premiums from federal income; submitted a comment letter on the Federal Housing Finance Agency’s (FHFA) Request for Input (RFI) on its Equitable Housing Finance Plans; and joined the Black Homeownership Collaborative in calling on the Biden Administration to focus on the critical need for housing production to address the significant deficit that continues to drive up home prices across the country.

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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.

Blog: Do the math – Buying a home now is possible

Posted on by Chloe Plefka

With record low housing supply and high inflation contributing to skyrocketing home prices, the barriers to owning a home may seem insurmountable. But buying a home in a sustainable, affordable way is possible with low down payment mortgage options. First-time and low- to medium-income homebuyers can qualify for mortgage financing without emptying their bank accounts and can keep some cash on hand for home improvements or a rainy-day fund.

Conventional home loans backed by private mortgage insurance (MI) have been available for borrowers for decades and helped nearly 2 million homebuyers in the past year purchase or refinance a mortgage. Private MI is a temporary cost that allows for a down payment as small as 3% of the purchase price. While some borrowers wait until they save 20% for a down payment, the added years of saving can translate to higher interest rates, more expensive home prices and lost home equity.

“Renters who are on the hunt to buy should do the math and consider what is best for them, because often they will find that purchasing with a low down payment mortgage provides buyers with an ability to access the market sooner, and ends up being a significant advantage for them,” said Lindsey Johnson, president of U.S. Mortgage Insurers (USMI).

In today’s market, it could take a family earning the national median income up to 21 years to save 20%, according to calculations by USMI.

If you are one of these renters looking to buy your first home but don’t have 20% down, don’t worry: you are not alone. According to the National Association of REALTORS® (NAR), the typical down payment in 2021 was 7% for first-time homebuyers and 17% for repeat homebuyers.

How can buying now save you money later?

Consider you want to purchase a $375,000 home, the median sales price for a single-family home in 2021, according to NAR. A 5% down payment is $18,750 versus $75,000 for 20% down. With a 740 credit score at today’s MI rates, your monthly MI payment would be about $157, which is included in your monthly mortgage payment until the MI can be canceled, usually after five years once you reach 20% equity in the home.

Due to robust home price appreciation (HPA) that came in at 17.5% for 2021, today’s $375,000 home will likely cost more in the years ahead. This will also have an impact on the necessary down payment and length of time required to save for it. There are other variables in the equation too, such as interest rates. As interest rates rise, so too can the cost of mortgage financing.

Not all low down payment mortgages are the same. Importantly, government-backed loans insured by the Federal Housing Administration (FHA) require at least a 3.5% down payment, an upfront charge that must be paid at closing or added to your loan balance, and the monthly insurance is permanent for the life of the loan.

There are many online mortgage calculators that can help. Check out lowdownpaymentfacts.org to learn more.

Letter: Joint Trades Letter on Enterprise Credit Score Model Framework

Posted on by Chloe Plefka

USMI submitted a comment letter to the Federal Housing Finance Agency (FHFA) in regards to the implementation of Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“the Act”). As FHFA prepares to implement the Act, we write to request that it provide additional data, a detailed transition plan that is subject to stakeholder input, and ample time for any transition. This request need not delay FHFA’s decision regarding its review and approval of one or more credit score models, but instead would ensure that the transition to one or more new models is as smooth as possible. See here for the full letter.

Statement: Senate Confirmation of Julia Gordon as Federal Housing Commissioner

Posted on by Chloe Plefka

WASHINGTON — Lindsey Johnson, President of U.S. Mortgage Insurers (USMI), issued the following statement on the Senate’s confirmation of Julia Gordon to serve as Assistant Secretary for Housing, Federal Housing Commissioner, Department of Housing and Urban Development (HUD):

“USMI welcomes the confirmation of Julia Gordon to serve as Federal Housing Administration (FHA) Commissioner. In Commissioner Gordon, America gains an accomplished leader with broad experience in the housing finance system, who has specialized in supporting affordable homeownership and consumer protection policies for underserved markets. Her confirmation comes at a critical time as many homeowners, renters, and residents supported by the FHA continue to experience pandemic-related hardships and families face barriers to homeownership due to severely limited supply and record home price appreciation.

“The FHA is an important piece of the housing finance system that helps provide affordable housing opportunities to moderate- and low-income borrowers, and we are confident that Commissioner Gordon will be a strong steward of the agency’s government-backed mortgage lending program. USMI and our member companies look forward to working closely with Commissioner Gordon in seeking ways to establish a more complementary, collaborative, and consistent housing policy between the conventional and FHA markets that we serve.”

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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: Departure of USMI President Lindsey Johnson

Posted on by Chloe Plefka

WASHINGTON – U.S. Mortgage Insurers (USMI) announced today that Lindsey Johnson, USMI president, will be leaving the organization in June to serve as the next president and CEO of the Consumer Banking Association.

USMI Board Chair, Derek Brummer, of Radian said:

“I am confident that I can speak on behalf of our Board of Directors and USMI member companies, when I say that Lindsey is an extraordinary professional, subject matter expert, leader and advocate. She has served as USMI’s president since 2015 and has been a tireless defender of sustainable and prudent low down payment lending and expanded homeownership opportunities for more Americans.  We thank Lindsey for her steadfast leadership at USMI and wish her tremendous success at the Consumer Banking Association.”

USMI President Lindsey Johnson said:

“Our member companies have enabled more than 10 million households to become homeowners during my tenure as USMI president. Leading USMI has been a true professional privilege and I will always appreciate being a small part of the incredible role that the private mortgage insurance industry plays in creating sustainable homeownership for so many people. I have been extremely fortunate to have the incredible leadership of the USMI Board of Directors, and to work alongside their talented and knowledgeable teams and the amazing USMI team, and it is because of them that we have made great strides in advancing many of the industry’s policy priorities. I am also grateful for the relationships that have been forged, for me and for USMI, with the professionals across the housing and mortgage finance industry and in government with whom we work. I look forward to seeing what the next chapter for USMI holds under the leadership of my successor.”

Lindsey Johnson will continue to serve as USMI president through June 6, 2022 and will work closely with the USMI Board of Directors and staff on its leadership transition planning. The USMI Board will commence a search for a new president.

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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.