Click here to download the full op-ed as a PDF.
Category: News
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.
###
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.”
###
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.”
###
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.”
###
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.
Press Release: USMI Responds to FHFA Announcement on Expanding 97 LTV Loans
For Immediate Release
December 8, 2014
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
USMI Responds to FHFA Announcement on Expanding 97 LTV Loans
“USMI members welcome the announcement from the Federal Housing Finance Agency (FHFA) to expand access to 3% low down payment mortgages.
“Private mortgage insurance (MI) has been readily available to creditworthy borrowers in this market segment for many years. Restoring access to these loans is an important option that will help creditworthy first-time homebuyers achieve affordable homeownership in a sensible and responsible manner.
“USMI members continue to believe that the return of 97% LTV mortgages with MI purchased by the GSEs for all creditworthy borrowers would further expand access to credit while providing substantial first-loss protection for taxpayers provided by private capital.
“USMI members are ready to help implement the new program and to ensure that creditworthy borrowers have access to affordable and sustainable mortgages within a well-functioning U.S. housing finance system.”
###
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: Status of PMIERs
For Immediate Release
December 3, 2014
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
Statement by USMI on Status of PMIERs
“On July 10, 2014, the FHFA published a Request for Input soliciting feedback on a draft of revised private mortgage insurer eligibility requirements (“PMIERs”). FHFA initially indicated that a final version of the PMIERs would be published by year end 2014. Since then, FHFA has advised USMI member companies that they have revised their timeline and do not expect to release final PMIERs until at least late in the first quarter of 2015.
“USMI members remain united in support of the need to update the PMIERs. When finalized, those standards will confirm the long-term value of MI for mortgage borrowers, lenders, and taxpayers. Accordingly, USMI will continue to work closely with FHFA and the GSEs to finalize and implement the PMIERs and urges finalization of these important standards.”
###
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 Files Broad Tax Extender Support Letter to Congress
Today, USMI joined 586 organizations across the country in filing a letter to the United States Senate and House of Representatives, urging Congress to act in the Lame Duck session to extend seamlessly, enhance or make permanent the expired and expiring tax provisions.
Download the Letter to the U.S. House of Representatives.
Download the Letter to the U.S. Senate.
Statement: Status and Solvency of the FHA Insurance Fund
For Immediate Release
November 17, 2014
Media Contacts
Robert Schwartz 202-207-3665 (rschwartz@prismpublicaffairs.com)
Michael Timberlake 202-207-3637 (mtimberlake@prismpublicaffairs.com)
Statement by USMI on Status and Solvency of the FHA Insurance Fund
“Today, 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 short of its 2% capital ratio mandate. In light of today’s report, USMI urges 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.”
###
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.
Factsheet: Backgrounder on the Value of Responsibly Underwritten 97 LTV Loans
Bringing Back the 3% Down Payment Loan: Good for First-Time Homebuyers and Taxpayers
On October 20, Federal Housing Finance Administration (FHFA) Director Watt announced that FHFA and the GSEs were working on guidelines to expand access to 3% low down payment mortgages. Private mortgage insurance (MI) has been readily available to creditworthy borrowers in this market segment for many years, and those responsibly underwritten low down payment loans have a long track record of good performance – comparable in fact to 5% down payment loans. At a time when the share of first-time homebuyers is declining, restoring access to these loans is an important option that would help creditworthy borrowers, especially first-time homebuyers, achieve affordable homeownership in a sensible and responsible manner. Wider availability of prudently underwritten 97% LTV loans would present many benefits for both consumers and taxpayers.
- Reduce Taxpayer Exposure with Private Capital: The return of a 3% down payment mortgage purchased by the GSEs for creditworthy borrowers would not present undue to risk to taxpayers because the GSEs require the use of MI, providing substantial first-loss protection for taxpayers in the form of private capital. Through the use of MI, a prudently underwritten 3% down payment loan with MI actually reduces taxpayer exposure below a comparable 20% down payment loan without MI.
In addition, the absence of low down payment options backed by private capital has only shifted greater risk to taxpayers. Offering a 3% down payment loan with MI purchased by the GSEs would reduce taxpayer risk by giving borrowers an alternative to FHA and other government programs, where taxpayers are responsible for 100% of losses. Furthermore, because FHA allows sellers to contribute up to 6% of the sales price, FHA loans may now already be effectively in excess of 97% LTV.
- Strong History of Performance: MI has been readily available to creditworthy borrowers in this market segment for many years, and those responsibly underwritten low down payment loans have a long track record of good performance – comparable in fact to 5% down payment loans. According to the Urban Institute, data on default rates for loans with a down payment between 3-5 percent was comparable to that for loans with a slightly larger down payment of between 5-10 percent.
- Provide Responsible Loans With High Standards: The regulatory and underwriting landscape has changed dramatically since the crisis. Fully documented low down payment loans were not the cause of the mortgage crisis, and Dodd-Frank requirements have removed the products that were. The return of 3% low down payment loans would have to be consistent with new Qualified Mortgage standards’ emphasis on responsible lending, and be fully documented.
- Increase Affordable Options for Creditworthy Borrowers: Coming up with the required down payment can be one of the biggest hurdles to homeownership. For example, it could take about 20 years for the average firefighter or schoolteacher to save a typical 20% down payment. Right now, many low down payment borrowers are left with no other option but government lending programs such as FHA. Borrowers without a sufficient down payment are required to have government-sponsored mortgage insurance, which cannot be cancelled and thus adds significant additional costs to the borrower over the life of the loan. Loans with private MI offer borrowers an additional option, one that is not only highly competitive in terms of pricing, but also cancelable once the LTV has reached approximately 80%, thus providing substantial savings to borrowers. These borrowers would also benefit greatly from an opportunity to purchase while 30-year fixed rates are near historic lows.
Providing qualified buyers greater access to 3% low down payment loans is yet another example of how MI can help make mortgage credit available to more qualified borrowers, working with lenders of all sizes, while protecting taxpayers.
###
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.
