Category: News

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.”

###

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.

###

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.

###

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 Helped Nearly 2 Million Low Down Payment Borrowers in 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 helped nearly 2 million low down payment borrowers secure mortgage financing in 2021, similar to the industry’s 2020 activity, according to data from the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. The industry also supported nearly $585 billion in mortgage originations, according to public filings. More than 80 percent of this volume by loan count was for new purchases while approximately 20 percent was for refinance loans. This resulted in nearly $1.4 trillion in outstanding mortgages with active private MI coverage at year’s end, underscoring the industry’s critical role serving as the first layer of protection against credit risk in the conventional mortgage market backed by the GSEs.

“As the economy continues to navigate the impact of the COVID-19 pandemic, conventional loans backed by private MI kept leveling the homebuying field for millions of low down payment borrowers,” said Lindsey Johnson, President of USMI. “In 2021, private MI companies continued to be well-capitalized and maintained their high volumes, allowing more families achieve the dream of homeownership.”

USMI worked closely with federal policymakers, industry groups, and consumer organizations to support and advocate for low down payment homebuyers 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 comment letters on the Federal Housing Finance Agency’s (FHFA) Request for Input (RFI) on its Equitable Housing Finance Plans; joined the Black Homeownership Collaborative calling 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; among many other actions it took in support of first-time, low- to moderate-income (LMI), and minority homebuyers.

“Skyrocketing home prices combined with record low housing supply have made homeownership unreachable for many. It is critical that affordable, sustainable low down payment mortgages are available to meet borrowers’ needs,” said Johnson. “Private MI assumes the first loss —limiting risk to taxpayers and the government— while also facilitating access to sustainable and affordable mortgage finance credit for millions of people who do not have significant down payments.”

Home price appreciation (HPA) reached 17.5 percent over the course of 2021, according to FHFA’s House Price Index (HPI®). In addition, the U.S. median home price hit a record in March, reaching $375,300, according a press release issued yesterday by the National Association of REALTORS®. At the end of 2021, the private MI industry collectively held more than $10.4 billion in excess of the capital requirements set by the GSEs, for a sufficiency ratio of over 170 percent. The MI industry has enabled more than 37 million people to access affordable and sustainable low down payment mortgages in its 65-year history. In 2021, nearly 60 percent of purchase loans backed by MI went to first-time homebuyers, over 40 percent went to borrowers with incomes below $75,000, and the average loan amount with MI was approximately $310,000.

###

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 Calls for Senate Finance Committee to Co-Sponsor the Middle Class Mortgage Insurance Premium Act of 2022

Posted on by Chloe Plefka

USMI sent letters to members of the Senate Finance Committee encouraging them to co-sponsor the Middle Class Mortgage Insurance Premium Act of 2022, introduced by Senator Maggie Hassan (D-NH) and co-sponsored by Senator Roy Blunt (R-MO). USMI writes, “This important bipartisan legislation would expand eligibility for and make permanent the tax deduction for MI premium payments for borrowers who put less than 20 percent down to purchase their home and qualify for financing thanks to private MI or government-backed MI through the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA).” Read our letters to Chairman Ron Wyden and Ranking Member Mike Crapo.

Op-Ed: Building the Goal of Increasing Minority Homeownership

Posted on by Chloe Plefka

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.

Blog: Where Housing Legislation Stands in an Election Year

Posted on by Chloe Plefka

By Brendan Kihn, Senior Government Relations Director of USMI

As the country kicks off primary elections in the mere matter of weeks, policymakers and advocacy groups are already sizing up what can and cannot be accomplished before voters go to the polls on November 8 for the 2022 midterm election. Just over a year ago, the Democrats gained control of the White House, Senate, and House of Representatives – their first trifecta since January 2011 – and Democrats were hopeful that the party could advance a long list of policy priorities related to taxation, healthcare, and housing investments. Following the enactment of the American Rescue Plan Act, which included $10 billion in homeowners assistance and $22 billion in emergency rental assistance, and the Infrastructure Investment and Jobs Act (the “Bipartisan Infrastructure Deal”), Democrats turned their attention to the Build Back Better Act (BBB), which includes more than $150 billion in housing investments.

Status Update on the “Build Back Better” Agenda

Policymakers are acutely aware of the affordability challenges facing homebuyers and there is especially bipartisan support for increasing housing supply. BBB, both the specific bill and the Biden Administration’s general policy theme, represents a broad collection of policy objectives and programs which includes initiatives to promote access to homeownership, fair housing, and affordable rental opportunities. BBB’s historic investment in housing includes:

  • $65 billion to preserve and rebuild public housing
  • $26 billion to create and preserve affordable and accessible housing
  • $24 billion for new Housing Choice Vouchers to support families struggling to afford their rent
  • $10 billion in down payment assistance for first-time, first-generation homebuyers
  • $500 million for a wealth-building home loan program
  • $250 million increase in allocation to Federal Home Loan Bank Affordable Housing Programs (AHP)
  • $100 million to increase access to small-dollar mortgages

The U.S. House of Representatives passed BBB on November 19 with a 220-113 vote only for the bill to hit a major roadblock in the Senate exactly one month later. On December 19, Sen. Joe Manchin (D-WV) announced that “[d]espite my best efforts, I cannot explain the sweeping Build Back Better Act in West Virginia and I cannot vote to move forward on this mammoth piece of legislation.” The Democrats’ razor thin majority in the Senate (50 plus Vice President Harris) creates a tenuous “working majority,” whereby a single defection or absence can make or break a piece legislation. In this case, it is crystal clear that BBB as passed by the House is dead.

2022 began with a certain degree of legislative soul searching among Democrats to strategize avenues to pass elements of BBB that can either: (1) garner bipartisan support and pass via regular order with a 60-vote threshold in the Senate; or (2) enjoy support from the entire Democratic caucus for passage via reconciliation. Democrats will face internal and external pressure to pass something in an effort to show voters that they can govern and deliver for the American people who handed them the levers of power in the 2020 election. Housing advocates remain adamant that housing investments should be included in any legislative packages that seek to advance the Biden Administration’s BBB agenda. And, while critics are concerned that BBB will “dramatically reshape our society,” there is an equally strong sentiment among others that such a “reshape” is exactly what is necessary to invest in the American people and expand economic opportunities, including access to affordable homeownership.

Expanding Access to Mortgage Finance

USMI, as articled in its “2022 Policy Priorities for Access, Affordability & Sustainability in the U.S. Housing Finance System,” has consistently supported legislative and regulatory reforms to remove barriers to homeownership and promote an equitable and sustainable housing finance system. As policymakers seek to advance equity in the housing finance system and address significant affordability issues, they must thread the needle of expanding access to homeownership without further driving up housing costs in a very tight market. The country is experiencing an alarming shortage of homes, most notably in the “starter home” segment of the market, with only 1.8 months of supply for existing homes at the end of 2021, according to the National Association of Home Builders (NAHB). This has been one of the primary drivers of strong home price appreciation which came in at 17.5 percent for 2021, according to the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI). While home price appreciation is a boon for existing homeowners who rapidly build up equity that can be tapped for other financial goals, increasing house prices represent a real hurdle for families looking to attain homeownership.

Survey and reports, including USMI’s 2021 National Homeownership Market Survey, routinely identify saving for a down payment as one of the primary challenges that families face when it comes to purchasing. Recent year’s home price appreciation demonstrates the critical need to ensure continued robust access to low down payment mortgages, where borrowers can put as little as 3 percent down with private mortgage insurance (MI) and 3.5 percent down with government-backed insurance. However, for those who are unable to cobble together the funds for a 3 or 3.5 percent down payment, non-profit organizations and governmental entities throughout the country operate thousands of down payment assistance (DPA) programs designed to help these homebuyers. Policymakers have honed in on DPA as a tool to expand homeownership and legislative proposals, most notably House Finance Services Committee (HFSC) Chairwoman Waters’ (D-CA) Downpayment Toward Equity Act (H.R. 4495 / S. 2920). These proposals understand the need to focus these programs to those who need assistance most, targeting first-time, first-generation homebuyers. BBB included $10 billion for such a program and housing advocates had called for that number to be increased to $100 billion. In the wake of BBB stalling in the Senate, policymakers in the House are exploring upcoming legislative vehicles to appropriate funds for targeted DPA.

Housing Tax Provisions

Mortgage Insurance Premium Tax Deduction

At the end of 2021, various temporary tax provisions commonly referred to as “tax extenders” expired, including the deduction for MI premiums. Borrowers who are unable to put down 20 percent for their homes typically finance the purchase transaction with loans that have either private MI of government-backed MI through the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), or U.S. Department of Agriculture (USDA), and these premiums have been tax deductible for many homeowners since 2007. This deduction has been extremely beneficial for first-time, younger, and minority homebuyers who often rely on low down payment mortgages to purchase homes due to limited access to funds or intergenerational wealth for large down payments.

In December 2021, Reps. Ron Kind (D-WI) and Vern Buchanan (R-FL) introduced H.R. 6109 and earlier this month Sens. Maggie Hassan (D-NH) and Roy Blunt (R-MO) introduced S. 3590 to permanently extend the tax deduction for MI premiums and expand taxpayer eligibility by increasing the income threshold. This bipartisan, bicameral legislation would ensure that millions of homeowners continue to benefit from this tax deduction, which in 2019 amounted to an average deduction of more than $2,000.

State and Local Tax Deduction

One housing-related tax provision that has been extremely important to senators from high-cost states (which often happen to be Democratic states) is addressing the $10,000 limit on state and local tax (SALT) deductions through tax year 2025 imposed by the Tax Cuts and Jobs Act of 2017. In fact, changes to the SALT deduction are so high on the priority list for some members of Congress that they have declared “No SALT, no deal” with regard to supporting a BBB-like package. The House-passed version of BBB raised the SALT deduction cap from $10,000 to $80,000 for tax years 2021 through 2030 but, due to no chance of passage in the Senate, the cap remains unchanged. Outside of the BBB legislative process, lawmakers on both sides of the aisle have introduced standalone bills to address, in various manners, the current SALT cap, including:

  • SALT Deductibility Act (R. 613 / S. 85) – repeals the temporary cap for tax years 2021 through 2025.
  • SALT Fairness Act (R. 202) – repeals the temporary cap for tax years 2021 through 2025.
  • SALT Deduction Fairness Act (804) – increases the cap to $20,000 for joint filers for tax years 2021 through 2025.
  • SALT Fairness for Working Families Act (R. 2439) – increases the cap to $15,000 for individual filers and $30,000 for joint filers for tax years 2021 through 2025.

As Democrats look for legislative vehicles to address SALT, including upcoming spending bills and smaller packages that advance targeted portions of BBB, there is a growing sense that modifications should be tailored to help middle class Americans and not amount to a giveaway to millionaires and billionaires.

******

The pressure is on for Democrats to deliver on the Build Back Better agenda that was a pillar of the 2020 Biden campaign. One month in Washington, DC is a long time and eight months can seem like an eternity, but all eyes will be on the White House and congressional Democrats’ internal negotiations to determine what housing policies, if anything, can be passed before voters head to the polls in November.

Article: Home Prices Fuel Push to Revive Mortgage Insurance Tax Break

Posted on by Chloe Plefka

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)

Statement: Nomination of Sandra Thompson as FHFA Director

Posted on by dcadmin

WASHINGTON — Lindsey Johnson, President of the U.S. Mortgage Insurers (USMI), today issued the following statement on President Biden’s intent to nominate Sandra Thompson for Federal Housing Finance Agency (FHFA) Director:

“USMI and our member companies welcome President Biden’s nomination of Sandra Thompson to serve as the next Director of FHFA. Thompson brings decades of experience in financial regulation, risk management, and consumer protection, all of which will help ensure the safety and soundness of the GSEs, Fannie Mae and Freddie Mac, and the Federal Home Loan Banks and will help instill strength into the housing finance system.

“Since being named Acting Director of FHFA in June, Thompson has quickly demonstrated her commitment to promoting an equitable and robust conventional mortgage market that balances access to affordable and sustainable mortgage credit. Private mortgage insurers share Thompson’s objectives to achieve sustainability and affordability for borrowers, as well as enhance equitable access to all those who are mortgage ready. Once confirmed by the Senate, the MI industry looks forward to continuing to work with Thompson in her new capacity to advance these goals.”

###

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: December 2021

Posted on by dcadmin

With the recent passage of the bipartisan infrastructure bill, Congress has moved onto the Build Back Better Act, which includes approximately $170 billion in funding for housing initiatives. On December 1, a bill was introduced in the House to make permanent and expand eligibility for the federal tax deduction of mortgage insurance (MI) premiums. USMI recently submitted two comment letters to the Federal Housing Finance Agency (FHFA) on its proposed “Amendments to the Enterprise Regulatory Capital Framework Rule,” and its “Enterprise Equitable Housing Finance Plans.” Finally, USMI published a new blog examining the costs that are often additional and unanticipated by prospective homeowners. We delve into these developments and more below.

Build Back Better Act
The Middle Class Mortgage Insurance Premium Act of 2021
USMI Submits Comment Letter on FHFA’s Proposed Amendments to the Enterprise Regulatory Capital Framework
USMI Submits Comment Letter on FHFA’s Enterprise Equitable Housing Request for Input
New Blog: Hidden Costs Harmful to Homeownership
What We’re Reading
Nominations We’re Watching
ICYMI: USMI Member Spotlight – Essent

Build Back Better Act. The House passed the $1.75 trillion Build Back Better (BBB) Act on November 19, sending the social spending bill to the Senate. The legislation allocates about $170 billion to provisions for affordable housing. According to the Biden administration, this would be the largest investment in affordable housing in history and it will mean the construction or preservation of more than 1 million affordable homes. BBB, in its current form, would provide funding for numerous homeownership initiatives, including: $10 billion for first-generation first-time homebuyer down payment assistance (DPA) based on House Financial Services Committee Chairwoman Maxine Waters’ (D-CA) “Downpayment Toward Equity Act”; $10 billion for the U.S. Department of Housing and Urban Development’s (HUD) HOME Investment Partnerships Program to fund building, buying, and/or rehabilitating affordable housing for rent or homeownership; $5 billion for wealth-building loans (20-year subsidized mortgages) for first-generation first-time homebuyers based on Sen. Mark Warner’s (D-VA) “Low-Income First-Time Homebuyers Act” (LIFT Act); $1.75 billion for a new “Unlocking Possibilities” zoning and land use reform program; $800 million for fair housing activities; and $100 million for a pilot program at HUD to expand small-dollar mortgage options for homebuyers purchasing homes at $100,000 or less.

The Middle Class Mortgage Insurance Premium Act of 2021. On December 1, Reps. Ron Kind (D-WI) and Vern Buchanan (R-FL) introduced legislation that would make permanent and expand eligibility for the deduction of MI premiums from federal income taxes. USMI released a statement writing that the legislation “is smart public policy that benefits potentially millions of existing homeowners…Since 2007, the ability to deduct the cost of MI premiums has helped to put extra dollars back into the hands of millions of families each year and we strongly support legislation to make the tax deduction permanent.” MI deductibility has enjoyed broad bipartisan support, dating back to when the bill was originally introduced in 2005, and continues to have broad housing industry support, including from the Mortgage Bankers Association, National Association of Home Builders, National Association of REALTORS®, and National Housing Conference. National Mortgage News, DS News, Financial Regulation News and InsuranceNewsNet.com published articles on the proposed legislation that quote the bill’s sponsors and USMI.

USMI Submits Comment Letter for FHFA’s Proposed Amendments to the Enterprise Regulatory Capital Framework. On November 23, USMI submitted a comment letter on FHFA’s Notice of Proposed Rulemaking (NPR) on “Amendments to the Enterprise Regulatory Capital Framework (ERCF) Rule – Prescribed Leverage Buffer Amount and Credit Risk Transfer.” In its letter, USMI recommends that FHFA adjust the credit risk transfer (CRT) minimum risk weight floor to lower than 5 percent, consider alternative methods to determine the Prescribed Leverage Buffer Amount (PLBA), reduce the single-family risk weight floor to 10 percent or less, and make changes to the Countercyclical Adjustment. These recommendations are outlined further in USMI’s executive summary to the comment letter.

Most comments to the NPR support the proposed changes by FHFA to CRT and the PLBA. On the PLBA, many respondents note that the proposed changes would make the framework more risk-based and prevent the PLBA from being the typical binding requirement. On the proposed changes to reduce the minimum risk weight floor for CRT from 10 to 5 percent, most commenters generally supported the reduction and some suggested it be reduced or refined further. Most commenters also supported the removal of the overall effectiveness adjustment for CRT. In addition, many responses – including from insurance agency Guy Carpenter, Freddie Mac, and the Housing Policy Council – support reducing the single-family risk weight floor below the current 20 percent in the final rule. Further, several other organizations – including Urban Institute, Center for Responsible Lending, National Community Stabilization Trust, National Housing Conference, Consumer Federation of America, Leadership Conference and the National Association of REALTORS® – express concerns with the current Countercyclical Adjustment and recommend FHFA revisit this element within the final rule to ensure it will not have unintended consequences.

In a press release, USM President Lindsey Johnson is quoted saying, “We appreciate the work FHFA has undertaken to date to provide for minimum capital requirements for the Enterprises, including the December 2020 final rule to establish a post-conservatorship capital framework. While a robust framework is necessary to ensure the stability of the housing finance system, overly stringent requirements or ones that inaccurately reflect the risks of the assets held by the Enterprises can be disruptive. It is critical FHFA creates a capital framework that strikes an appropriate balance between maintaining borrowers’ access to affordable mortgage credit and ensuring the Enterprises and taxpayers are protected from risk.”

USMI Submits Comment Letter on FHFA’s Enterprise Equitable Housing Request for Input (RFI). On October 25, USMI submitted a comment letter to FHFA’s RFI on “Enterprise Equitable Housing Finance Plans” (the Plans), which articulates a framework by which the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, will be required to prepare and implement three-year plans to advance equity in housing finance. USMI writes in its letter that it “commends the FHFA for soliciting feedback on the Plans to identify the barriers to sustainable housing opportunities, set goals to address those barriers, and implement policies to address them. The private MI industry welcomes the opportunity to work with FHFA, the GSEs, and other housing finance stakeholders to support the Biden Administration’s goal of a comprehensive approach to advancing equity for all.” In its comment letter, USMI specifically recommends that FHFA review and reform loan-level price adjustments (LLPAs); review and revise the ERCF; modify the Preferred Stock Purchase Agreements (PSPAs); finalize the new products and activities rule; and provide greater data and transparency to address longstanding inequities in the housing finance system.

New Blog: Hidden Costs Harmful to Homeownership. In USMI’s latest blog on its 2021 National Homeownership Market Survey, we examined the way hidden or unanticipated costs impact homeownership. Home prices are increasing at historic levels and consumers expect both home prices and mortgage interest rates to increase over the next year. Sixty percent of respondents to the survey believe minorities face added homebuying costs because they tend to have lower credit and higher debt according to the survey. The survey also found that 60 percent of respondents believe reducing costs for low down payment homebuyers is the most important item for the homebuying process and 37 percent support cutting hidden costs on mortgages.

What We’re Reading. On December 2, Fannie Mae released a report titled, “Barriers to Entry: Closing Costs for First-Time and Low-Income Homebuyers,” which analyzed the costs associated with closing a mortgage loan and presented potential solutions to reduce certain closing costs for specific borrowers, where these additional costs may act as a barrier to homeownership. Based on a sample of 1.1 million conventional purchase mortgages acquired in 2020, Fannie Mae found that “median closing costs as a percent of home purchase price were 13 percent higher for low-income first-time homebuyers than for all homebuyers, and 19 percent higher than for non-low-income repeat homebuyers.”

Nominations We’re Watching. Julia Gordon, the nominee to lead the Federal Housing Administration, is still waiting on a full Senate vote. Meanwhile, the Senate Committee on Banking, Housing, and Urban Affairs on December 2 favorably reported via voice vote the nomination of Alanna McCargo to serve as the president of Ginnie Mae.

ICYMI: USMI Member Spotlight – Essent. In case you missed it, Essent Chairman and CEO Mark Casale was featured on our member spotlight. Casale shared his thoughts on Essent’s views on the housing market as we come out of the COVID-19 pandemic, the continued evolution of the private MI industry and the role of innovation, and how this evolution will better serve borrowers and the housing finance system. Read the full Q&A here.