Category: News

Blog: Do the math: Homebuying now may save a lot

Posted on by dcadmin

It is a common misconception that a 20 percent down payment is required to buy a home. Advice to wait and save a large down payment is often based on the theory that the cost of mortgage insurance (MI), which is required when you buy with a smaller down payment, should be avoided. This may not be the best advice and is, in fact, not in line with market trends, considering 60 percent of homebuyers buy with a down payment of 6 percent or less, according to the National Association of Realtors.

Yes, you can qualify for a conventional mortgage with a down payment as small as 3 percent of the purchase price. It is also true that you can reduce your monthly mortgage payment by paying for discount points at closing, but that can be 5 or 10 percent of the purchase price — not 20. And because every buyer’s situation is unique, it’s important to do the math. In today’s market, it could take a family earning the national median income up to 20 years to save 20 percent, according to calculations by U.S. Mortgage Insurers using a methodology developed by the Center for Responsible Lending; a lot can change during that time, in the family’s personal finances and in overall mortgage market trends.

How can buying now save you money later?

Consider you want to purchase a $235,000 home. A 5 percent down payment is $11,750 versus $47,000 in cash for 20 percent down. With a 740 credit score at today’s MI rates, your monthly MI payment would be about $110, which is added to your monthly mortgage payment until MI cancels. MI typically cancels after five years; therefore, you will only have this added cost for a short period of time versus waiting an average of 20 years to save for 20 percent.

With home price appreciation, today’s $235,000 home will likely cost more in the years ahead and 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 federal rates rise, so too can the costs associated with financing a mortgage. The savings a borrower might calculate today could be altogether negated by waiting even a few more years. Another factor is that rents are on the rise across the nation, leading to a reduced capacity for many would-be homebuyers to save for larger down payments.

If you decide to buy today with a low down payment mortgage option, it is true that MI is an added cost on top of mortgage principal and interest, but keep in mind that it is temporary and goes away. Again, it typically lasts about five years. Private MI can be cancelled once a homeowner builds approximately 20 percent equity in the home through payments or appreciation and automatically terminates for most borrowers once he or she reaches 22 percent equity. And when MI is cancelled, the monthly bill goes down. Importantly, the insurance premiums on an FHA mortgage — the 100 percent taxpayer-backed government version of mortgage insurance — cannot be cancelled for the vast majority of borrowers with FHA mortgages.

So, do the math and let the numbers guide you. There are many online mortgage calculators that can help. Check out lowdownpaymentfacts.org to learn more.

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.”

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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.

Newsletter: November 2017

Posted on by dcadmin

As the Thanksgiving holiday nears, there has been a cornucopia of news in housing finance. Here is a roundup of recent news to ensure you stay up-to-date on the latest happenings. In a yearly ritual like the Macy’s Day Parade, the Federal Housing Administration (FHA) released its annual report to Congress highlighting the health of its Mutual Mortgage Insurance Fund (MMIF). In the days leading up to the release of the report, the Heritage Foundation wrote a blog post in opposition to terminating the FHA’s life of loan policy in collecting mortgage insurance premiums (MIP), which a number of groups have sought in recent months. Tax reform has gobbled up much of the news over the past few weeks, and this week the House of Representatives passed its tax reform bill. Finally, just like the abundant feasts of Thanksgiving, the House Financial Services Committee’s (HFSC) Housing and Insurance Subcommittee held Part III of its “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform” hearing series).

  • FHA Releases 2017 Annual Report to Congress. The FHA released its annual report to Congress on the health of its MMIF for 2017 – an important measurement of the FHA’s fiscal strength in the housing finance market. According to the report, the MMIF stands at 2.09 percent, down from 2.35 percent last year and just slightly above the statutory requirement of 2 percent. The report also found that the FHA insures more than $1.2 trillion in mortgage credit risk – an increase from its 2016 annual report. DSNews reported that U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson is ensuring the public that HUD is working to better the fiscal health of the FHA. Secretary Carson said, “The fiscal health of FHA demands our constant attention and vigilance to ensure we can continue providing sustainable homeownership opportunities to working families without exposing taxpayers to excessive risk. Our duty is clear—we must make certain FHA remains financially viable so future generations can build wealth and climb the economic ladder of success.” In a statement on the FHA’s annual report to Congress, USMI President and Executive Director Lindsey Johnson said: “The FHA has taken important steps in recent years to improve its financial stability after requiring a $1.7 billion government bailout in 2013 when the agency did not have the necessary capital to cover losses, though more needs to be done. With more than $1.2 trillion in mortgage credit risk, the FHA must enhance its financial strength to continue to serve the borrowers who need it the most… Now is the time for the FHA to refocus on its core mission, scaling back from the oversized role it played during the recession so that it can return to serving low-to-moderate income individuals who need the FHA’s 100-percent government backed loans the most.”
  • House of Representatives Passes Tax Reform Legislation. Yesterday, the House of Representatives voted 227 to 205 to pass R. 1, the “Tax Cuts and Jobs Act.” Among many other provisions included in the tax plan, the bill reduces the mortgage interest deduction from $1 million to $500,000 and caps the deduction for property taxes at $10,000. The U.S. Senate will soon vote on its own tax proposal and, if it passes, will go to conference with the House to negotiate a final bill through reconciliation. To read more about USMI’s views on the House’s tax reform bill, please click here.
  • Housing and Insurance Subcommittee Holds Housing Finance Reform Hearing—Part III. A HFSC subcommittee received testimony from representatives of the Milken Institute, American Enterprise Institute (AEI), Moody’s Analytics, Cardiff Consulting Services, and the Urban Institute for housing finance reform. Importantly, former Ginnie Mae President and current Milken Institute Senior Fellow Ted Tozer called for a balanced deployment of government and private capital in support of a fairer and more efficient housing finance system, and also called for the overall reduction of the government footprint as more private capital re-enters the system at different points in the primary and secondary mortgage markets. Tozer’s remarks echo what other housing experts have said about private capital in the housing finance system, which reduces mortgage credit risk to U.S. taxpayers and the federal government.
  • Heritage Foundation Opposes Terminating FHA Life of Loan Premium Coverage. In a recent article, Heritage Foundation scholars John Ligon and Norbert Michel spoke out against terminating FHA MIP, saying that “these changes would be unfair to federal taxpayers that subsidize the cost of the Federal Housing Administration’s insurance program.” The authors specifically mention a recent bill introduced in the House of Representatives that would eliminate the FHA’s current life of loan policy. The authors also urged neither Congress nor the FHA to make any policy changes that would weaken the agency’s ability to cover insurance losses. USMI also opposes reducing FHA’s premium or cancelling FHA’s premiums collected for the life of the loan, because the 100-percent government-backed FHA will continue to hold the same amount of mortgage credit risk while collecting less in insurance premiums, thereby putting taxpayers and the federal government at increased risk. In fact, according to the findings in the FHA’s 2017 annual report to Congress, if the FHA had reduced insurance premiums as planned in January, the MMIF would be at 1.76 percent and undercapitalized. 

Statement: FHA’s Annual Report to Congress

Posted on by Rhina Portillo

Report Shows Agency’s Financial Reserves Weakening

WASHINGTON — Today, the Federal Housing Administration (FHA) released its “Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance Fund (MMIF) Fiscal Year 2017.” The following statement can be attributed to Lindsey Johnson, USMI President and Executive Director:

“The Federal Housing Administration today released its 2017 annual report to Congress on the financial status of its MMIF. According to the report, the MMIF stands at 2.09 percent, down from 2.35 percent last year and now just slightly above the statutory requirement of 2 percent. The FHA has taken important steps in recent years to improve its financial stability after requiring a $1.7 billion government bailout in 2013 when the agency did not have the necessary capital to cover losses, though more needs to be done. With more than $1.2 trillion in mortgage credit risk, the FHA must enhance its financial strength to continue to serve the borrowers who need it the most.

“The FHA is a critical part of the housing finance system. While there have been calls to reduce FHA insurance premiums, today’s report makes clear that had this happened, the fund would be at 1.76 percent and undercapitalized. The FHA should resist calls for significant policy changes, such as reducing the cost of its insurance or cancelling the collection of insurance premiums while the FHA insurance protection remains in-force on a mortgage. This will help the agency rebuild its financial strength.

“Now is the time for the FHA to refocus on its core mission, scaling back from the oversized role it played during the recession so that it can return to serving low-to-moderate income individuals who need the FHA’s 100-percent government backed loans the most. Today borrowers have low down payment options through the conventional market backed by private mortgage insurance. Private mortgage insurers put their own capital at risk, paying more than $50 billion in claims since the financial crisis, and have all implemented new higher robust capital standards. USMI looks forward to working with Congress and the Administration to establish a coordinated and consistent housing policy so that private capital can shoulder more of the credit risk in the housing markets, while FHA and the private sector act in the marketplace together to ensure borrowers have access to safe, sustainable and affordable mortgage options. Private MI has served as a reliable and affordable credit enhancement tool for more than 25 million American families for 60 years.”

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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: House Tax Reform Legislation

Posted on by dcadmin

WASHINGTON — U.S. Mortgage Insurers (USMI) President and Executive Director Lindsey Johnson issued the following statement on H.R. 1, the “Tax Cuts and Jobs Act,” the comprehensive tax bill released by the U.S. House Ways and Means Committee yesterday:

“USMI is encouraged by efforts in Congress to simplify the current tax code for everyday Americans and to promote economic growth. Comprehensive tax reform holds the promise of allowing Americans to keep more of their hard-earned money, modernize the tax code to help working families and spur economic growth.

“The House Republican proposal represents an important start towards putting the American tax system on a more simple and sustainable path, but USMI is concerned that the current draft excludes the premiums paid by borrowers for mortgage insurance as part of the definition of ‘mortgage interest.’ Since 2007, the deductibility of mortgage insurance premiums has provided helpful tax relief for millions of middle class homeowners with low and moderate incomes. IRS data from 2015 show the mortgage insurance deduction was claimed on 4.1 million tax returns that year—the vast majority of those returns had incomes ranging between $30,000 and $100,000. This is clear evidence that this specific tax deduction should be preserved because it helps make homeownership more affordable for Americans who value and need this help the most. So long as mortgage interest remains tax deductible, as is the case in the House legislation, so too should mortgage insurance.

“We understand comprehensive tax reform is as challenging of an undertaking as it is important—and we know there are difficult choices that have to be made throughout the process. USMI supports many of the stated objectives of tax reform, but is concerned that current and prospective low- and moderate-income homebuyers will lose an important deduction that they have come to build into the cost of their mortgage. Therefore, USMI will continue to work with House and Senate leadership to ensure the final tax reform package includes this important provision aimed at helping bring down borrowing costs for responsible taxpayers who need it most.”

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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: Nomination Hearing of Brian Montgomery for FHA Commissioner

Posted on by Rhina Portillo

WASHINGTON — Lindsey Johnson, President and Executive Director of the U.S. Mortgage Insurers (USMI), today issued the following statement on the U.S. Senate Committee on Banking, Housing, & Urban Affairs’ hearing on the nomination of Brian Montgomery for Federal Housing Administration (FHA) Commissioner:

“Brian Montgomery is a respected expert and seasoned mortgage finance professional who our industry supports to serve once again as FHA Commissioner. While serving in the President George W. Bush administration, Mr. Montgomery led the FHA when the agency expanded as part of its countercyclical role during the financial crisis – a time of unprecedented market stress. As such, Brian Montgomery has the historic experience and expertise to oversee and manage the FHA’s return to its smaller, appropriate, and intended role in the market focusing on those borrowers who need the FHA’s 100% taxpayer-backed loans the most. The conventional mortgage market today is healthy and continues to prudently serve creditworthy homebuyers, including those with low down payments.

“The FHA serves an incredibly important role for many low-to-moderate income borrowers. We are confident that as FHA Commissioner, Brian Montgomery will continue to be a champion for a robust housing finance system that strikes the appropriate balance between the conventional market backed by private capital and government-backed FHA loans. We agree with Mr. Montgomery’s previously expressed 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, and it is encouraging to know that he believes the FHA ‘should never take the place of the private sector first-loss solution provided by private mortgage insurers.’

“While the FHA serves a very important function in the housing finance system, its footprint has expanded dramatically since the financial crisis. Now is the time to focus on ensuring that the FHA is not overexposing taxpayers to undue risk and refocus the agency on its core mission of serving borrowers who need 100% government-backed home loans. We look forward to working closely with Brian Montgomery in seeking ways to establish a more collaborative, coordinated, and consistent housing policy and to help expand private capital’s role in shouldering more risk in front of taxpayers in the housing market. For 60 years private mortgage insurance has played a leading role in promoting affordable and sustainable homeownership and we look forward to building upon our success in the future.”

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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: Confirmation of Deputy HUD Secretary Pam Patenaude

Posted on by Rhina Portillo

WASHINGTON — Lindsey Johnson, President and Executive Director of the U.S. Mortgage Insurers (USMI), today issued the following statement on the confirmation of Pam Patenaude to be Deputy Secretary of the Department of Housing and Urban Development (HUD):

“USMI applauds the Senate for its confirmation of Pam Patenaude to be Deputy Secretary of HUD. As a longtime public servant and expert in the housing finance system, Deputy Secretary Patenaude fully understands the need for a coordinated, consistent, and transparent approach to federal housing policy across government channels.

“Deputy Secretary Patenaude’s extensive background in housing finance will allow her to immediately begin work on the most important issues facing the housing finance system. Importantly, Deputy Secretary Patenaude’s leadership in these efforts will ensure that Americans have greater access to mortgage finance credit, promote a greater role for increased private capital in mortgage finance, and reduce taxpayer risk exposure. USMI and the private mortgage insurance industry look forward to working with Deputy Secretary Patenaude going forward to establish a more equitable and robust housing finance system.”

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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.

Letter: USMI Joins Coalition in Support of Full Senate Vote on Pam Patenaude

Posted on by Rhina Portillo

USMI joined nearly 60 other organizations in supporting a full Senate vote on the nomination of Pam Patenaude as HUD Deputy Secretary. Click below to read the full coalition letter. Click here to download the letter as a PDF.

Blog: How to lower your monthly mortgage payment

Posted on by Rhina Portillo

Owning your own home comes with many advantages, including escaping rising rents and the personal and financial stability associated with homeownership. Fortunately, millions of Americans, with less than 20 percent down, have been able to buy a home sooner thanks to mortgage insurance (MI). If you don’t put down 20 percent of the mortgage cost, you will likely be required to purchase MI, which enables low-down-payment borrowers to qualify for home financing from lenders.

While homeownership has many benefits and continues to be part of the American Dream, it is not without costs. Several surveys have found that the majority of first-time homebuyers — over 80 percent according to one study — put less than 20 percent down. For these borrowers, there is usually the added expense of MI, which may give some of these borrowers pause.

But there is good news: the monthly private mortgage insurance premiums do not last forever on most conventional loans. And when private MI (PMI) cancels, homeowners will have more cash in their pockets each month — money that is available for home improvements or other goals. It is important to understand, however, that not all MI is the same, and not all MI can be canceled.

There are numerous low-down-payment mortgage options available that include MI. The two most common are: (1) home loans backed 100 percent by the government through the Federal Housing Administration (FHA) that include both an upfront and annual mortgage insurance premium (MIP); and (2) conventional loans, which are typically backed at least in part by private sources of capital, such as private MI. The key difference is that one form can be canceled (PMI) while the other (FHA) typically cannot be canceled.

An FHA loan can be obtained with a down payment as low as 3.5 percent. However, be aware that you will typically have to pay a mortgage insurance premium (MIP) of 1.75 percent of the total loan amount at closing or have it financed into the mortgage. In addition to your regular monthly mortgage payments on your FHA loan, you will also pay a fixed monthly MIP fee for the life of the loan. This means you could pay hundreds of dollars extra every month — thousands over the life of the loan — until you pay off the entirety of the loan.

If you obtain a conventional loan with PMI, you can put as little as 3 percent down. Like an FHA loan, PMI fees are generally factored into your monthly mortgage payment. However, PMI can often be canceled once you have established 20 percent equity in the home and/or the principal balance of the mortgage is scheduled to reach 78 percent of the home’s original value. This means that the rest of your mortgage payments will not include any extra fees, so that your payments go down in time, saving you money each month. What you save in the long run can then be put toward expenses like home renovations, which can further increase your home’s value.

MI is a good thing because it bridges the divide between a low down payment and mortgage approval. But not all MI is created equal. If you want to buy a home but still save in the long run, PMI might be the right option for you. Check out lowdownpaymentfacts.org to learn more.

Report: Urban Institute Report Highlights Role Private Mortgage Insurers Have Played to Protect Taxpayers, Expand Access to Homeownership for 60 Years

Posted on by Rhina Portillo

For 60 years, private mortgage insurance (MI) has helped more than 25 million families become successful homeowners. To commemorate this milestone, the Urban Institute examined the industry’s history and the positive role MI has served for homebuyers and the mortgage finance system overall. Urban notes in its study, “[p]rivate mortgage insurers have played a crucial role over the past six decades enabling first-time homebuyers to gain access to high-[loan-to-value] conventional financing while reducing losses for the GSEs.” The report confirms that the presence of private mortgage insurance makes it easier for creditworthy borrowers with limited down payments to access conventional mortgage credit. This is the primary function of MI – to help borrowers qualify for home financing.

The report also focuses on the role MI plays to reduce taxpayers’ exposure to mortgage credit risk. MI insures the first-loss credit risk to the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, helping to reduce GSE losses, and therefore taxpayers’ losses, on defaulted mortgages. And historical experience and data show MI works. Urban found that GSE loans with MI consistently have lower loss severities than those without MI. In fact, for nearly 20 years, loans with MI have exhibited lower loss severity each origination year. The Urban analysis shows 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.”

Loss Severity for GSE Loans with and without PMI, by Origination Year Groupings

Sources: Fannie Mae, Freddie Mac, and the Urban Institute.

Note: GSE = government-sponsored enterprise; PMI = private mortgage insurance. The GSE credit data are limited to 30-year fixed-rate, full documentation, fully amortizing mortgage loans. Adjustable-rate mortgages and Relief Refinance Mortgages are not included. Fannie Mae data include loans originated from the first quarter of 1999 (Q1 1999) to Q4 2015, with performance information on these loans through Q3 2016. Freddie Mac data include loans originated from Q1 1999 to Q3 2015, with performance information on these loans through Q1 2016.

 

This data, coupled with the more than $50 billion in claims our industry paid since the GSEs entered conservatorship—which represents over 97% of valid claims paid, underscores how MI provides significant first-loss protection for the government and taxpayers. By design, MI provides protection before the risk even reaches the GSEs’ balance sheets. As the government explores ways to further reduce mortgage credit risk while also ensuring Americans continue to have access to affordable home financing, the data shows private MI is an important solution.

The MI industry, like nearly all other industries in financial services, was tested like never before through the financial crisis. Urban’s report acknowledges the challenges the industry has overcome from the financial crisis and the opportunities ahead for the industry. Coming out of the crisis, the MI industry is even stronger with more robust underwriting standards, stronger capital positions, and improved risk management. Additionally, in the last two years, private mortgage insurers have materially increased their claims paying ability in both good and bad economic times due to new higher capital standards under the Private Mortgage Insurance Eligibility Requirements (PMIERs).

Urban notes that the industry “should be more resilient going forward” because of the important changes applied to the industry today – including the enhanced capital, operational, and risk standards ‒ and highlights the broad agreement among parties studying GSE reform for the need to reduce the government’s footprint and increase the role of private capital. These developments have helped strengthen the industry and new reforms can allow MI to take on an even greater role to continue protecting taxpayers and expanding access to homeownership for the next 60 years and beyond.

Letter: Comments on CFPB on the Ability-to-Repay/QM Rule

Posted on by Rhina Portillo

On July 31st, USMI submitted the following response to the request for comment regarding the Consumer Financial Protection Bureau’s notice of assessment of the Ability-to-Repay/Qualified Mortgage rule. USMI applauds the Bureau for undertaking an assessment of this critical rule that is aimed at enhancing lending standards and consumer protection, now that sufficient time has passed since it went into effect. As described in the letter, USMI encourages the Bureau to assess whether different QM standards across the various regulatory agencies have negatively impacted consumers. Click here to read the full letter.

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