Statement: Bipartisan Senate Confirmation of Dana Wade as FHA Commissioner

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 Dana Wade to serve as Federal Housing Administration (FHA) Commissioner:

“USMI applauds the Senate for its bipartisan vote to confirm Dana Wade to serve as FHA Commissioner. Commissioner Wade is a respected expert with broad experience in financial and housing policy issues, which provide her of the adequate tools to tackle the challenges facing the FHA and housing finance system going forward.

“Commissioner Wade has shown commitment to keeping FHA’s core mission of providing affordable housing opportunities to moderate and low-income households, who need the agency’s 100 percent taxpayer-backed loans the most. We are confident that Commissioner Wade will continue to carry out this mission as she understands the important role the agency plays in our housing financial system.

“The FHA has improved its financial health over the last few years, however it is important that policymakers keep their focus on ensuring that the FHA is not overexposing taxpayers to undue risk. The FHA-insured market and the conventional market should complement one another. For more than 60 years private mortgage insurance has played a leading role in promoting affordable and sustainable homeownership. We look forward to working closely with Commissioner Wade in seeking ways to establish a more complimentary, collaborative, and consistent housing policy that can expand private capital’s role in shouldering more risk in front of taxpayers in the housing market.”

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U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.

Newsletter: July 2020

We wish everyone a happy, healthy July 4th holiday and thank those who continue to serve the nation on the front lines of the COVID-19 health crisis. USMI and our members remain committed to supporting the U.S. housing finance system, ensuring homeowners continue to have access to prudent, affordable, low down payment mortgages to keep more cash on hand, especially during these critical and uncertain economic times. Additional information can be found on USMI’s COVID-19 Resource page. Below are updates related to COVID-19 as well as other recent significant policy and regulatory developments.

USMI Releases its Annual State-by-State Report
New Board Chairman at USMI
FHFA and the GSEs Provide Clarity on PMIERs Amid COVID-19
SCOTUS Rules on CFPB’s Single-Director Structure
CFPB Proposes Rules on QM Definition and Extension of the GSE Patch
FHFA Issues Re-Proposed Enterprise Capital Rule
ICYMI: New Video Explains How Private MI Work

  • USMI Releases its Annual State-By-State Report. On June 22, USMI released its annual report on low down payment lending at the state level. The report highlights that the number of low down payment loans backed by private mortgage insurance (MI) increased 22.9 percent in 2019; meanwhile saving for a 20 percent down payment could take potential homebuyers 21 years to save — three times the length of time it could take to save a 5 percent down payment. USMI also found that the top five states for low down payment home financing with private MI were Texas, California, Florida, Illinois, and Ohio.

    Upon release of the report, USMI President Lindsey Johnson noted that “Given the current economic environment and the desire of many people to keep more cash on-hand, low down payment loans are more important than ever. Loans backed by private MI are a great option as a time-tested means for accessing homeownership sooner while still providing credit risk protection and stability to the U.S. housing system.” See coverage of the report by National Mortgage News, Forbes, and Bankrate.
  • New USMI Board Chairman. On July 1, USMI announced that Derek Brummer, President of Mortgage at Radian Group, will serve as the Chairman of USMI’s Board of Directors. Brummer, who was appointed Radian’s President of Mortgage in February, previously served as USMI’s Vice Chairman of the Board and brings extensive experience in housing finance. In the announcement, Brummer stated that he looks “forward to ensuring the industry remains well-positioned to serve as an important source of strength for the housing finance system during all market cycles, so consumers continue to have access to affordable, low down payment, conventional mortgages.”
  • FHFA and the GSEs Provide Clarity on PMIERs Amid COVID-19. On June 26,the Federal Housing Finance Agency (FHFA) and the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, provided guidance on the Private Mortgage Insurer Eligibility Requirements (PMIERs), PMIERs 2020-01, effective June 30, 2020. PMIERs are a set of operational and risk-based capital requirements implemented in 2015 and updated in 2018 for private MI companies to be approved to insure loans acquired by Fannie Mae and Freddie Mac. Due to the unprecedented nature of the COVID-19 disaster, including its national scope and the ongoing duration of the health and economic effects, the PMIERs language needed additional clarity, which USMI is pleased FHFA, Fannie Mae and Freddie Mac understood and provided.

    USMI President Lindsey Johnson said in a statement, “USMI supports the actions taken by federal policymakers, particularly the FHFA, to stabilize the economy and provide assistance to those who have been impacted by the COVID-19 pandemic. USMI’s member companies are well-positioned to support the FHFA and GSEs’ efforts to ensure that homeowners who have been affected by COVID-19 are able to stay in their homes and maintain a safe and secure environment for their families.”
  • SCOTUS Rules on CFPB’s Single-Director Structure. On June 29, the Supreme Court ruled in a 5-4 decision in Seila Law v. CFPB that the single-director structure of the Consumer Financial Protection Bureau (CFPB), where the leadership by a single director that is removable only “for cause” (inefficiency, neglect, or malfeasance), violates the Constitution. However, the Court did not invalidate the agency in its entirety. The majority held that the removal protection of the CFPB Director is severable from the other provisions of the Dodd-Frank Act that created the CFPB and defined its authorities and responsibilities. The CFPB did not challenge the decision and the White House released a statement saying the Supreme Court’s “decision represents an important victory for the fundamental principle that government officials should be accountable to the American people.” Given the FHFA has a similar structure, it is likely the legal conclusion may be applied to the FHFA. The Court’s decision opens the door for any future new administration to usher in new leadership of these two independent agencies.
  • CFPB Proposes Rules on QM Definition and Temporary Extension of the GSE Patch. With the temporary QM category, also known as the “GSE Patch,” set to expire on January 10, 2021, the CFPB released Notices of Proposed Rulemakings (NPRMs) on a new QM definition and to temporarily extend the GSE Patch on June 22, 2020. Comments for the general QM definition are due 60 days after the rule is published in the Federal Register. In a statement after the release of the NPRMs, USMI President Lindsey Johnson stated, “USMI members, as takers of first-loss mortgage credit, emphasized the need to balance prudent underwriting with a clear standard that maintains access to mortgage finance for home-ready borrowers.”

    The CFPB previously released an Advanced NPRM on the QM definition over a year ago, after which USMI submitted a comment letter that among other things, recommended replacing the current GSE Patch by establishing a single transparent and consistent QM definition that balances access to mortgage finance credit and proper underwriting guardrails to ensure consumers’ ability to repay (ATR). USMI specifically recommended that the Bureau establish a list of transparent mitigating underwriting criteria (compensating factors) for loans with a debt-to-income ratios above 45 percent and up to 50 percent. USMI also recommended that, to provide a more level playing field between the Federal Housing Administration (FHA) and the conventional market, the QM Safe Harbor annual percentage rate (APR) cap of the Average Prime Offer Rate (APOR) + 150bps needs to be increased to not arbitrarily shift the market to FHA, or leave some home-ready borrowers without access to mortgage finance credit. Setting the cap at APOR + 200bps would limit this arbitrary shift in the market, preserve greater private capital participation in the pricing of risk, and promote better taxpayer protection.

    The Bureau’s June 2020 NPRM on the QM definition largely proposes an approach that would rely on a pricing spread between APR and APOR to determine QM status. While it is notable that the Bureau retained a QM Safe Harbor and QM Rebuttable Presumption, it is critical that the Safe Harbor threshold be increased from 150bps to 200bps above APOR, as it has been demonstrated that few loans are done outside of Safe Harbor. As USMI commented in its 2019 comment letter, it is essential that the Safe Harbor threshold be moved from 150bps to 200bps to ensure that creditworthy borrowers are not arbitrarily left only with the option of an FHA mortgage or left out of the market entirely, and to promote greater private capital participation in the pricing of risk and better taxpayer protection.
  • FHFA Issues Re-Proposed Rule on Enterprise Capital. Another very significant rule recently released is the re-proposed Enterprise Regulatory Capital Framework (ERCF), which was published in the Federal Register this week, starting the 60-day clock for comments to be submitted. FHFA noted that one of the key reasons for the re-proposed rule is that establishing robust capital standards is a key step in the process to end the GSEs conservatorships, which was “a departure from the expectations of interested parties at the time of the 2018 proposal.” FHFA also noted that the re-proposed rule increases the quantity and quality of the regulatory capital at the GSEs to ensure their safety and soundness—with the overall capital required under the 2020 proposal being roughly $240 billion in loss absorbing capital—nearly $100 billion more than the 2018 proposal. FHFA officials believe that the re-proposed rule puts the GSEs on track to begin raising capital as soon as next year.

    USMI submitted a comment letter to the FHFA in 2018 when the ERCF was originally proposed. On May 21, USMI issued a statement in response to the re-proposed rule, sharing its support for “meaningful capital requirements” and recognizing the ERCF’s importance in determining the future role of the GSEs, how private capital, such as private MI, will be able to continue to support the conventional market to protect taxpayers, and importantly, determine consumers’ access to and cost of mortgage finance credit.
  • ICYMI: New Video Explains How Private MI Works. As part of June’s National Homeownership month, USMI released a new video helping first-time homebuyers understand whether they are mortgage ready. The video explores low down payment financing options to future homeowners and explains the benefits of private mortgage insurance.

Press Release: USMI Names Radian’s President Of Mortgage Derek Brummer as Chairman

WASHINGTON — U.S. Mortgage Insurers (USMI) today announced that Derek Brummer will serve as the association’s new Chairman of the Board. Brummer is the President of Mortgage at Radian Group Inc. (NYSE: RDN). He succeeds Bradley Shuster, Executive Chairman of NMI Holdings, Inc. (Nasdaq: NMIH). Brummer’s appointment comes at a significant time as the Administration continues to take steps to reshape the government sponsored enterprises (GSEs), and the housing finance system responds to the current economic environment and the needs of homeownership during the novel coronavirus (COVID-19).

“For more than 60 years, the MI industry has helped American families become homeowners and has stood in front of mortgage credit risk that the government and taxpayers may otherwise have to bear. As sophisticated managers of mortgage credit risk and sources of dedicated private capital, MI companies serve a critical role in the U.S. housing finance system. As USMI’s Chairman, I look forward to ensuring the industry remains well-positioned to serve as an important source of strength for the housing finance system during all market cycles, so consumers continue to have access to affordable, low down payment, conventional mortgages,” said Brummer. “Over the last several years, more than 80 percent of first-time homebuyers have used low down payment mortgages. Today, these loans backed by private MI are more important than ever to enable borrowers to keep more cash on-hand, enabling those borrowers to purchase homes sooner than they otherwise could and begin to build the long-term wealth and stability that can come with homeownership.”

Brummer previously served as USMI’s Board Vice Chair. He was named Radian Group Inc.’s President of Mortgage in February and brings extensive experience in the housing industry to USMI’s chairmanship. Brummer joined Radian in 2002, serving as Chief Risk Officer since 2013 and as head of Mortgage Insurance and Risk Services since 2018. Prior to that, he was Chief Risk Officer and General Counsel for Radian’s financial guaranty company. Before joining Radian, Brummer was a corporate associate at Allen & Overy LLP as well as Cravath, Swaine & Moore LLP in New York.

“Derek’s experience and leadership in the mortgage insurance industry are invaluable assets to our industry association. We are excited to welcome and work with him as USMI’s new Chairman,” said Lindsey Johnson, President of USMI. “I want to also offer my deep gratitude to Bradley Shuster for his dedication and commitment to USMI as Chairman for the past two years. We greatly appreciate Brad’s efforts, which have been critical to the industry, and we value his continued role on our board of directors.”

Mark Casale, who is the President and CEO of Essent Guaranty, will take over as Vice Chairman of the Board of USMI, and Rohit Gupta, President and CEO of Genworth MI, will serve as USMI’s Treasurer and Secretary of the Board.

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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.