USMI President Seth Appleton authored an opinion piece in the Springfield News-Leader on the greatest challenges that future homebuyers face in his home state using data from USMI’s 2024 National Homeownership Survey. In the piece, he explains how thousands have been able to purchase with low down payment mortgages using private MI and calls for the renewal of a tax deduction that more than 14,000 Missourians claimed in 2021 before the deduction expired. “For 15 years, millions of homeowners relied on this deduction to offset some of the costs of homeownership. There aren’t that many no-brainers in Washington, D.C. This, however, is one of them,” said Appleton. Read the full piece here.
Category: Articles & Op-eds
Op-Ed: Automated mortgage insurance cancellation is a dangerous plan
Op-Ed: Low Down Payment Mortgages Make It Possible To Buy A Home In A High-Rate Environment
Article: USMI Seeks Improved Treatment for Private MI
Article: USMI Calls for Changes to Proposed Bank Capital Rule
Article: Stronger Boundaries Needed For FHA/GSEs, USMI Says
Article: Dipping mortgage rates, creative financing options gives glimmer of hope for aspiring home buyers
Op-Ed: You can still buy a house with a low down payment
Op-Ed: PMI is good for first-time buyers and housing finance system
Op-Ed: Building the Goal of Increasing Minority Homeownership
By Lindsey Johnson, President of USMI
As we celebrate Black History Month, it is important to remember why the mortgage and housing finance systems need to focus on Black homeownership. Owning a home helps to increase financial security, enhance family and community stability, and build intergenerational wealth. According to the U.S. Census Bureau, the Black and Hispanic homeownership rates stand at 43 and 48 percent, respectively, compared to 74 percent for white households. Many have noted that this racial gap has alarmingly increased even after the Fair Housing Act was enacted in 1968, when explicit racial discrimination was legal. While the industry has focused on ways to decrease this racial gap, more needs to be done.
To better identify and highlight the greatest homebuying challenges for today’s borrowers, U.S. Mortgage Insurers (USMI) conducted a national survey last June. The National Homeownership Market Survey found that Black respondents are more likely to perceive greater challenges during the homebuying process, with credit scores, existing debt, and the inability to afford a down payment identified as the main obstacles. Nearly 60 percent of Black respondents said they spend more than 30 percent of their income on housing and are more likely to worry about making housing payments. Meanwhile, white respondents are three times more likely to say there are no barriers to homeownership.
In addition, nearly 70 percent of all survey respondents said that the lack of affordable housing was the top homebuying challenge. As home prices continue to soar while available inventory remains limited, stress surrounding the desire to purchase a home among minorities is likely to rise. According to the Federal Housing Finance Agency’s (FHFA) House Price Index, house prices rose 17.5 percent in 2021. Further, the National Association of REALTORS® Confidence Index Survey found that first-time homebuyers’ share of the market fell to 26 percent, and nearly 1 million renter households were priced out due to rising home prices.
The persistent racial gap needs to be addressed and we should work to speed up efforts to put sustainable homebuying within reach for more Americans. Fortunately, this challenge has the attention of housing and mortgage finance experts and policymakers, including FHFA Acting Director Sandra Thompson. As the conservator of the government-sponsored enterprises’ (GSEs), Fannie Mae and Freddie Mac, FHFA released a Request for Input (RFI) on Equitable Housing Finance Plans and included equitable housing as a pillar in its draft 2022-2026 Strategic Plan.
In its RFI, FHFA articulated a framework by which the GSEs will be required to prepare and implement three-year plans to advance equity in housing finance. FHFA’s actions are commendable, but the details on how to address access to homeownership matter. This is why USMI urged FHFA to use data-driven, targeted approaches to reduce barriers to affordable mortgages for minority households.
The issues facing minority and other underserved borrowers are complex, multi-faceted, and vary by geography. Addressing them means being very specific about identifying the borrowers being served, their specific issues, and target outcomes. Further, there should be consistency in how the government and GSEs approach initiatives related to access to home financing. These initiatives should aim to increase sustainable access to credit for borrowers that need assistance the most, while also reducing credit risk. Whether it’s FHA or FHFA, policies should also aim to not stoke additional demand into the marketplace, further driving up prices, which acutely impacts low- and moderate-income borrowers.
A few key areas that the housing industry and policymakers should focus on are: 1) affordable housing production; 2) financial and homeownership education and outreach; and 3) a holistic review of GSE pricing, including reexamining 2008-era Loan-level price adjustments (LLPAs), which disproportionately impact minority borrowers.
Lastly, there should be greater transparency around the GSEs’ credit policies, underwriting technologies, and performance in key areas, most notably access to credit for minority households. The data and other factors that contribute to decisions that impact the GSE credit box should be publicly available to better inform policies and mortgage products around access to credit. Increased transparency will encourage greater collaboration among policymakers and industry participants and promote policies that can bring a balance between supply, demand, and affordability.
Minority homebuyers represent those who will increase the rate of homeownership in America in the coming decades. As an industry that exclusively serves homebuyers with limited access to funds for large down payments, we believe the issues and challenges facing these borrowers today will require significant collaboration to ensure they have access to sustainable, affordable financing.
This piece was first published in The Hill on February 25, 2022.
Article: Home Prices Fuel Push to Revive Mortgage Insurance Tax Break
A Law360 article by David van den Berg reports on legislative efforts to restore the federal tax deduction for mortgage insurance premiums. USMI President Lindsey Johnson was quoted as saying, “With [the] expiration [of the MI tax deduction], millions of hard-working, middle-class homeowners wouldn’t have access to this benefit that puts money back in the pockets of those who need it the most, at a time when inflation is raising the cost of virtually all goods and home price escalation continues.”
To read the full article, please click here. (Subscription may be required)
Op-Ed: We must increase access to affordable mortgages for minority borrowers
By: Lindsey Johnson
Homeownership has been on the rise over the past few years even during the COVID-19 pandemic, but a deeper look at who is able to become a homeowner reveals significant racial and economic gaps. With a growing recognition in Washington of this disparity and a renewed focus on increasing financial security for Black and Hispanic families, policymakers and industry have the opportunity to correct inequities and sustainably increase minority homeownership.
U.S. Census data for the third quarter of 2020 show that homeownership among White households stands at nearly 76 percent, compared to nearly 51 percent for Hispanic households, and 46 percent for Black households. Meanwhile, of the minority borrowers who qualified for home financing, many encountered added costs that make homeownership disproportionately more expensive or altogether out of reach.
COVID-19 has further compounded the racial and economic gap as millions of low- to moderate-income families have lost their jobs and face financial insecurity. The Urban Institute finds that Black and Hispanic homeowners are significantly more likely to face financial hardships and are more at risk of not being able to pay their rent or mortgage payment due to the impacts of the pandemic.
So, while we must focus on the pandemic and its impact on borrowers, and particularly minority borrowers, we must also not lose sight of addressing the longer-term systemic issues that unnecessarily increase costs or create barriers for minority borrowers. Importantly, expanding homeownership opportunities for minority borrowers does not have to be at the expense of the reforms made over the last decade that have drastically improved lending to protect consumers and avoid another housing market collapse. The housing finance system can remain stable and manage mortgage credit risk prudently, while also using data-driven, targeted approaches to reduce barriers to affordable mortgages for Black and Hispanic households.
Mortgage affordability could be further stressed once new regulatory mandates are implemented. This includes new capital requirements for Fannie Mae and Freddie Mac (the GSEs) recently finalized by the Federal Housing Finance Agency (FHFA). While it is essential that the GSEs hold appropriate capital, the rule must be balanced and policymakers should consider changes to elements of the final rule that threaten to raise the cost of mortgages for all borrowers and push homeownership farther out of reach for many families of color.
Additionally, policies that adversely drive up costs for minority borrowers should be re-examined and reduced or eliminated. Loan-level price adjustments (LLPAs) that were introduced by the GSEs in 2008 are especially burdensome for minority and first-time homebuyers. These fees are disproportionately paid by borrowers with lower down payments and credit scores, whose mortgages are already protected by private mortgage insurance. Essentially, borrowers are being double charged for the same risk protection. Industry and consumer advocates — including the National Fair Housing Alliance and the Center for Responsible Lending — have long urged the GSEs to reduce or eliminate these redundant fees.
Further, it is critical that policymakers recognize the role of low down payment mortgage options in facilitating homeownership. In fact, more than 80 percent of first-time homebuyers used low down payment mortgage options in the past several years — with options as low as 3 percent down. While these options have prudently enabled millions of people of all backgrounds to become homeowners, even more targeted down payment assistance programs should be considered for borrowers who may not have intergenerational wealth or equity from a previous home to contribute to a down payment. Legislation like Rep. Al Lawson’s (D-Fla.) First-Time Homeowners Assistance Act should be given close consideration when re-introduced in 2021. Meanwhile, President Biden has already expressed interest in a first-time homebuyer tax credit — a very welcome early signal from the new administration.
There are other issues that warrant attention, such as the low supply of affordable housing and lack of access to financial education. This list goes on, and we recommend that the Biden administration assemble a task force that includes broad representation from industry, consumer advocate community, and government to formulate an action plan, build consensus, and get to work.
As an industry that exists to help low- and middle-income households qualify for low down payment mortgages, private mortgage insurers understand the need to balance responsible lending with access to affordable mortgage finance credit. There are tangible and measurable steps to sustainably expand homeownership for minority families and fortunately there is an eagerness across the housing policy sector to achieve these outcomes.
This piece was first published in The Hill on January 30, 2021.
