(June 10, 2015) A group of Senate Banking Committee members sent a letter today to FHFA urging them to expand and better define the development of the credit risk transfer programs at the GSEs.
The letter and press release can be found here.
Author: dcadmin
Op-Ed: Making Progress to Sustain Homeownership
Letter: USMI Welcomes Effort to Increase Reliance on Private Capital In Housing Finance
USMI delivered the following letter to members of the Senate Banking Committee last night:
The Honorable Richard Shelby
Chairman
U.S. Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Shelby:
U.S. Mortgage Insurers (“USMI”) welcomes the effort to make progress on increasing the reliance on private capital in housing finance as part of consideration by the Senate Banking Committee of the Financial Regulatory Improvement Act of 2015.
Specifically, USMI supports Section 706, which calls on the Government Sponsored Enterprises (“GSEs”) to engage in front-end risk sharing transactions. This directive would make greater use of private capital to “de-risk” the GSEs, lower the exposure and costs for the enterprises and taxpayers and should lower costs to borrowers. USMI supports this effort, and will continue to work with the Committee during the legislative process on clarifications to ensure the legislation has the intended effect of being “transaction neutral” to permit a variety of methods of up front risk sharing, with all risk sharing counterparties held to equivalent standards.
Promotion of greater up front risk sharing will help build a strong, stable housing finance system that provides access to sustainable and affordable mortgage credit while protecting taxpayers. We look forward to favorable action on this important effort.
Sincerely,
U.S. Mortgage Insurers
cc: The Honorable Sherrod Brown, Ranking Member
All members of the Senate Banking Committee
Statement: Final Mortgage Insurer Eligibility Requirements (PMIERs)
For Immediate Release
April 17, 2015
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Statement on Final Mortgage Insurer Eligibility Requirements (PMIERs)
Today, the Federal Housing Finance Administration (FHFA) published final revised Private Mortgage Insurer Eligibility Requirements (“PMIERs”), which set the requirements that private Mortgage Insurers (MIs) must meet to be eligible to insure loans acquired by Fannie Mae and Freddie Mac (the “GSEs”). The PMIERs include new risk-based financial requirements for MIs. USMI appreciates the efforts of FHFA and the GSEs to work with all interested parties to finalize the updates to the PMIERs.
USMI member companies are united in support of this important effort, and are committed to fully comply with PMIERs. Finalizing the PMIERs is an important milestone for the MI industry. Lenders, investors and other mortgage market participants can now have even more confidence in the value and financial strength of MI. USMI member companies encourage FHFA to apply these standards to all providers of credit enhancement to the GSEs to ensure our housing system remains strong and stable.
With PMIERs finalized, the industry is positioned to be in the forefront of efforts to meet the important goal of putting more private capital at risk ahead of taxpayers, including by providing upfront risk sharing and deeper MI coverage for the GSEs. USMI member companies stand ready to work with the GSEs, lenders and regulators on improving access to credit and homeownership for consumers.
The MI industry has recapitalized, attracted new entrants, and finalized new master policies that provide greater clarity and transparency regarding when and how MIs pay claims. Since the GSEs entered conservatorship, MI has covered over $44 billion in claims to the GSEs alone, resulting in a substantial savings to taxpayers.
USMI members are also continuing to work closely with the National Association of Insurance Commissioners’ Mortgage Guaranty Insurance Working Group as it updates the Mortgage Guaranty Insurance Model Act (“Model Act”) to update state regulation of MI. USMI members are committed to sound prudential regulation and requirements that work in a complementary manner to enable a stable and well-functioning housing finance market.
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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.
Comment Letter: USMI Responds to Basel Committee Credit Risk Proposal
For Immediate Release
March 31, 2015
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Responds to Basel Committee Credit Risk Proposal
U.S. Mortgage Insurers (USMI) submitted a response to the Basel Committee on Banking Supervision’s proposal, Revisions to the Standardised Approach for credit risk, which would, among other things, revise the calculation of banks’ risk weights for exposures secured by residential real estate under the Standardized Approach for calculating credit risk under the Basel capital framework.
USMI raised two primary areas of concern with the proposal: it does not appear to recognize the risk-reducing effect of private mortgage insurance in the calculation of residential mortgage risk weights, nor does it appear to recognize the risk-increasing effect of simultaneous second lien mortgages on primary residential mortgage exposures.
To address these concerns, USMI urged the Basel Committee to recognize the risk-reducing effect of mortgage insurance in the calculation of residential mortgage risk weights, pointing out several key benefits of mortgage insurance:
- Mortgage insurance plainly reduces the risk of a residential mortgage. Mortgage insurers leverage their credit expertise and analytics to extend insurance only on those mortgage loans they believe are soundly underwritten, providing an important third party check on mortgage underwriting practices. For example, in the U.S., private mortgage insurance has covered over $44 billion in claims to Fannie Mae and Freddie Mac (the “GSEs”) for such losses since the GSEs entered conservatorship, losses that otherwise would have been borne by taxpayers.
- Mortgage insurers are subject to considerable prudential regulation and oversight designed to ensure that they can pay claims when due. In the U.S., for example, private mortgage insurers are subject to a robust state-by-state regulatory regime. This regime will be complemented by the publication by the Federal Housing Finance Agency of the final revisions to the comprehensive private mortgage insurer eligibility requirements (“PMIERs”) later this year. When finalized and implemented, the PMIERs will be a unified and transparent set of risk management, operational risk, and regulatory compliance requirements applicable to all mortgage insurers seeking to do business with the GSEs.
- Recognizing the risk-reducing effect of mortgage insurance in the calibration of risk-weights in the Proposal would be consistent with the risk weighting approaches adopted by several Basel Committee member countries.
- Failure to recognize the risk-reducing effect of mortgage insurance would result in more expensive mortgages, tighter mortgage credit, and less low down payment lending supported by mortgage insurance. By ignoring the beneficial effect of mortgage insurance, the proposal would require banks to hold more capital against higher loan-to-value (LTV) loans with MI than would be warranted by the actual risk.
Additionally, USMI urged the Committee to use a combined loan-to-value ratio that gives effect to simultaneous second liens for residential mortgage risk weighting, rather than the first lien loan-to-value ratio. As written, the proposal ignores the significant risks inherent in loans with junior second liens originated at the same time on the same residence as the primary mortgage, also known as “simultaneous seconds” readily observed during the financial crisis.
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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.
Op-Ed: FHA and the need to strike the right balance for taxpayers
Newsletter: March 2015
The recent decision by the Federal Housing Administration (FHA) to lower annual mortgage insurance premiums has renewed the debate about the complementary roles of private Mortgage Insurance (MI) and the FHA government mortgage insurance program.
Below are links to background materials on this topic and excerpts from a related hearing before the House Financial Services Committee Housing and Insurance Subcommittee, which included testimony by Rohit Gupta, President and CEO of Genworth Mortgage Insurance and Chair of U.S. Mortgage Insurers (USMI) and other housing finance experts.
- USMI op-ed published in The Hill: FHA and the need to strike the right balance for taxpayers
- USMI on the Record: Excerpts of Rohit Gupta’s Testimony on the Complementary Roles of MI and FHA
- What Others Are Saying about MI and FHA: Excerpts from Panelists at the House Financial Services Subcommittee Hearing
Testimony: The Roles Of Private MI And FHA, the Need to Strike the Right Balance for Taxpayers
For Immediate Release
February 26, 2015
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Testifies on the Roles of Private MI and FHA, the Need to Strike the Right Balance for Taxpayers
Rohit Gupta, President and CEO of Genworth Mortgage Insurance and Chair of U.S. Mortgage Insurers (USMI), testified before the House Financial Services Committee Housing and Insurance Subcommittee today on behalf of the private Mortgage Insurance (MI) industry. The hearing, “The Future of Housing in America: Oversight of the Federal Housing Administration, Part II” followed a February 11 hearing featuring Housing and Urban Development Secretary Julian Castro on the condition of the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund (MMIF).
Gupta’s testimony focused on the recent decision to lower annual mortgage insurance premiums at FHA, which has generated much debate on the relative roles of government and private capital in supporting homeownership while also protecting taxpayers. Potential homeowners without the ability to make a 20 percent down payment currently have two options for the mortgage insurance necessary to obtain a mortgage: either from the government-backed FHA program, or from private mortgage insurance (MI). Gupta pointed out that while these options may sound similar, from a public policy perspective, they are quite different, especially when it comes to the impact on taxpayers.
Key differences are:
- Underwriting Incentives – FHA covers virtually 100 percent of losses if a loan defaults, which may provide less incentive to ensure that loans are underwritten and serviced in a prudent and sustainable manner. By contrast, MI covers first losses down to a stated coverage percentage, creating a strong incentive for prudent underwriting and good servicing.
- Taxpayer Impact – In the wake of the financial crisis, the FHA insurance fund required $1.7 billion from U.S. taxpayers due to a capital shortfall. In contrast, MI private capital covered over $44 billion in losses on loans sold to the GSEs since they entered conservatorship, losses that otherwise would have been shouldered by taxpayers.
- Capital and Oversight Requirements – FHA capital reserve standards are lower than MI. FHA is required to be at a minimum capital ratio of 2 percent of risk insured but is currently at only a 0.41 percent capital ratio, one fifth of the two percent statutory minimum. MIs are required to be at a minimum risk to capital ratio of 4 percent, and all MIs are reporting risk to capital ratios at or above 5 percent. MI’s will be required to meet even higher capital standards under revised GSE Private Mortgage Insurer Eligibility Requirements (PMIERs) that are due to be finalized later this year.
“FHA and private MIs can and should serve as complementary forces that enable the FHA to remain focused on its fundamental mission of serving underserved markets,” said Gupta. “But for this model to work properly, it is critically important that the FHA not stray too far afield from that mission.”
“The recent decision to lower annual mortgage insurance premiums at FHA…has two immediate consequences: (1) it slows the trajectory of FHA attaining the 2% minimum capital requirement; and, (2) it limits the…return of private capital to support U.S. housing finance,” Gupta continued.
A copy of Gupta’s testimony submitted to the Committee is available here which includes a sideby-side comparison of the protections for taxpayers from MI vs. FHA.
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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 Executive Leadership Changes
For Immediate Release
February 24, 2015
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Announces Executive Leadership Changes
USMI announced today changes in the trade association’s executive leadership. USMI Co-Chair Adolfo Marzol, Executive Vice President of Essent Guaranty, will be retiring at the end of March. Rohit Gupta, President and CEO of Genworth Mortgage Insurance, who served as Co-Chair with Marzol since the formation of USMI, will become the Chair of USMI.
“Adolfo was an essential figure in the formation and launch of USMI last year,” said Gupta. “He brought a tremendous wealth of experience and expertise to the industry and his many contributions will certainly extend beyond his tenure.”
“I am honored to have been part of forming USMI,” said Marzol. “This is a critical time for mortgage finance, and I am gratified at the growing understanding of the vital role MI plays to protect taxpayers, increase access for borrowers, and work with lenders of all sizes. I’m confident that the MI industry is well-positioned for the future under the leadership of USMI.”
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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: FHA Fee Reduction Announcement
For Immediate Release
January 8, 2015
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Statement on FHA Fee Reduction Announcement
“Last November, FHA released updated information on the status of the FHA insurance fund. While progress was made in restoring the financial health of the fund, it fell well short of its 2% capital ratio mandate. In light of that report, USMI urged policy makers to proceed cautiously and to carefully assess the impact of any potential FHA premium reductions on its solvency as well as its stated objective of returning the FHA to a smaller and more traditional share of the mortgage market.
USMI member companies urge Congress, FHA, and regulators to work together to further expand sustainable access to credit while increasing reliance on private capital. Mortgage insurers putting their own capital at risk should be preferred to government risk taking, consistent with the principles put forward by the Administration for housing reform. The MI industry has the capacity and capability to further reduce taxpayer risk and lower costs for many home buyers while expanding access to mortgage credit.”
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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 Commends Passage of Homeowner Tax Relief
For Immediate Release
December 17, 2014
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Commends Passage of Homeowner Tax Relief
“USMI commends passage by Congress last night of a one year extension of vital homeowner tax relief. We are especially pleased that the legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers. We look forward to working with Congress towards permanent enactment of this important tax relief for homeowners.”
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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.
Op-Ed: Now is the time to bring back the 3 percent down-payment mortgage
USMI Co-Chairs Rohit Gupta and Adolfo Marzol had their op-ed published in The Hill last week on December 3.
