Op-Ed: We must increase access to affordable mortgages for minority borrowers

By: Lindsey Johnson

Homeownership has been on the rise over the past few years even during the COVID-19 pandemic, but a deeper look at who is able to become a homeowner reveals significant racial and economic gaps. With a growing recognition in Washington of this disparity and a renewed focus on increasing financial security for Black and Hispanic families, policymakers and industry have the opportunity to correct inequities and sustainably increase minority homeownership.

U.S. Census data for the third quarter of 2020 show that homeownership among White households stands at nearly 76 percent, compared to nearly 51 percent for Hispanic households, and 46 percent for Black households. Meanwhile, of the minority borrowers who qualified for home financing, many encountered added costs that make homeownership disproportionately more expensive or altogether out of reach.

COVID-19 has further compounded the racial and economic gap as millions of low- to moderate-income families have lost their jobs and face financial insecurity. The Urban Institute finds that Black and Hispanic homeowners are significantly more likely to face financial hardships and are more at risk of not being able to pay their rent or mortgage payment due to the impacts of the pandemic.

So, while we must focus on the pandemic and its impact on borrowers, and particularly minority borrowers, we must also not lose sight of addressing the longer-term systemic issues that unnecessarily increase costs or create barriers for minority borrowers. Importantly, expanding homeownership opportunities for minority borrowers does not have to be at the expense of the reforms made over the last decade that have drastically improved lending to protect consumers and avoid another housing market collapse. The housing finance system can remain stable and manage mortgage credit risk prudently, while also using data-driven, targeted approaches to reduce barriers to affordable mortgages for Black and Hispanic households.

Mortgage affordability could be further stressed once new regulatory mandates are implemented. This includes new capital requirements for Fannie Mae and Freddie Mac (the GSEs) recently finalized by the Federal Housing Finance Agency (FHFA). While it is essential that the GSEs hold appropriate capital, the rule must be balanced and policymakers should consider changes to elements of the final rule that threaten to raise the cost of mortgages for all borrowers and push homeownership farther out of reach for many families of color.

Additionally, policies that adversely drive up costs for minority borrowers should be re-examined and reduced or eliminated. Loan-level price adjustments (LLPAs) that were introduced by the GSEs in 2008 are especially burdensome for minority and first-time homebuyers. These fees are disproportionately paid by borrowers with lower down payments and credit scores, whose mortgages are already protected by private mortgage insurance. Essentially, borrowers are being double charged for the same risk protection. Industry and consumer advocates — including the National Fair Housing Alliance and the Center for Responsible Lending — have long urged the GSEs to reduce or eliminate these redundant fees.

Further, it is critical that policymakers recognize the role of low down payment mortgage options in facilitating homeownership. In fact, more than 80 percent of first-time homebuyers used low down payment mortgage options in the past several years — with options as low as 3 percent down. While these options have prudently enabled millions of people of all backgrounds to become homeowners, even more targeted down payment assistance programs should be considered for borrowers who may not have intergenerational wealth or equity from a previous home to contribute to a down payment. Legislation like Rep. Al Lawson’s (D-Fla.) First-Time Homeowners Assistance Act should be given close consideration when re-introduced in 2021. Meanwhile, President Biden has already expressed interest in a first-time homebuyer tax credit — a very welcome early signal from the new administration.

There are other issues that warrant attention, such as the low supply of affordable housing and lack of access to financial education. This list goes on, and we recommend that the Biden administration assemble a task force that includes broad representation from industry, consumer advocate community, and government to formulate an action plan, build consensus, and get to work.

As an industry that exists to help low- and middle-income households qualify for low down payment mortgages, private mortgage insurers understand the need to balance responsible lending with access to affordable mortgage finance credit. There are tangible and measurable steps to sustainably expand homeownership for minority families and fortunately there is an eagerness across the housing policy sector to achieve these outcomes.

This piece was first published in The Hill on January 30, 2021.

Letter: To Honorable Marcia Fudge, HUD Secretary Designate

The Honorable Marcia Fudge
Secretary Designate
U.S. Department of Housing and Urban Development
451 7th Street SW
Washington, DC 20410

Dear Honorable Fudge,

U.S. Mortgage Insurers (“USMI”) and its member companies congratulate you on your nomination to serve as the Secretary of the U.S. Department of Housing and Urban Development (HUD). Your many years of public service, including as mayor of Warrensville Heights, Ohio and the U.S. Representative for Ohio’s 11th Congressional District, demonstrates your commitment to community, and will serve you well as Secretary of HUD, as you have no doubt seen in your own district the homeownership challenges facing hardworking American families.

For more than 60 years, the private mortgage insurance (MI) industry has enabled more than 33 million low- and-moderate income Americans to attain affordable and sustainable homeownership in the conventional market. Working with the government-sponsored enterprises (GSEs) —Fannie Mae and Freddie Mac— and lenders of all sizes and business models, private MIs help borrowers qualify for mortgage finance credit with down payments as low as three percent. In the past year alone, more than 1.5 million people were able to purchase or refinance their mortgage due to private MI. Nearly 60 percent of borrowers who purchased their home using private MI were first-time homebuyers and more than 40 percent had incomes of $75,000 or less. Importantly, because USMI members provide private capital in front of the GSEs and taxpayers, the industry also provides significant loss protection to the mortgage finance system, having covered well over $50 billion in claims through the 2008 financial crisis—losses that would have otherwise been borne by taxpayers.

Through the last year despite the unprecedented challenges presented by COVID-19 pandemic, mortgage credit has been largely affordable due to historically low interest rates and 2020 had the largest mortgage origination volume since 2006—both for the conventional and Federal Housing Administration (FHA) markets. Despite this record mortgage volume and historically low interest rates, there remain significant housing affordability challenges for many borrowers across the country, including that nationwide home price appreciation (HPA) has skyrocketed to 7.3 percent year-over-year, the highest increase since 2014. Moreover, for the past seven years, the segment of the market that has experienced the largest and fastest HPA has been the lower end of the market, which over the last year saw an increase of nearly 11 percent. A driving force behind the high HPA is the fact that consumer demand continues to outpace new home construction, thereby exacerbating housing affordability by driving up home prices and putting homeownership further out of reach for many prospective homebuyers, most notably for minority and first time borrowers.

Policy recommendations such as lowering FHA premiums too quickly and aggressively may significantly impact FHA’s ability to address the challenges that will arise as COVID forbearances end, and coupled with the high delinquencies for FHA loans, could ultimately lead to higher claims, potentially undermining FHA’s ability to help future borrowers. Further, reducing premiums would only add fuel to the fire in terms of artificially lowering what is already relatively affordable mortgage finance credit. Such actions would inject more “demand” into the market without addressing the “supply” side—which will only drive-up home prices further, hurting affordability at the lower end of the market most. Additionally, other policy recommendations such as ending FHA’s “life-of-loan” policy, which would require FHA to continue to insure loans (because FHA insurance does not in fact cancel) without coverage being paid for, could similarly weaken FHA and its ability to meet the housing needs of future borrowers, while also exposing taxpayers to undue risk. FHA’s insurance stays on the loan for the “life of the loan,” therefore those who suggest ending the “life of loan” premiums are essentially advocating for providing free government-backed insurance.

There are other areas that may represent barriers to homeownership that policymakers should also choose to explore, including the targeted use of down payment assistance (DPA) programs for the borrowers who are unable to attain even a 3 percent or 3.5 percent down payment, who truly need the support. It is important that DPA programs are structured and operated in a sustainable manner so as to not create excessive leverage and risk within the mortgage finance system, or pose undue risk to taxpayers and the economy, which will ultimately hurt vulnerable homeowners most. As federal policy makers look to increase homeownership, it is essential that it is done in a manner that promotes sustainable homeownership for borrowers, as it does more harm to a family to get into a home that they can then not afford. There are meaningful ways to enhance borrower sustainability, such as by using part of a DPA to establish a reserve account for certain borrowers. Reserve accounts have been proven to be predictive of a borrower’s ability-to-repay their loan, and by focusing on reserve accounts, HUD not only prioritizes getting people into homes, but also helping them be successful homeowners. There are other important considerations to promote sustainable homeownership, such as housing counseling, for borrowers where HUD or FHA aim to expand access to mortgage finance credit.

Finally, USMI’s members intimately understand the importance of ensuring access to affordable, prudent low down payment mortgages in the marketplace. Understanding that more than 80 percent of first-time homebuyers over the last several years have depended on access to low down payment lending, it is more important than ever that the government-backed FHA program and the conventional market backed by private MI operate in a consistent and coordinated manner. Each plays an important, and distinct, role in the housing finance system and they should not be competing for market share—a situation which ultimately does a disservice to the borrowers we serve and to taxpayers.

FHA has long been a vital resource for many borrowers who may not have the ability to attain mortgage finance credit through the conventional market. Our industry looks forward to working with you and welcomes the opportunity to further engage with HUD and FHA to identify and address risks in the system and barriers to homeownership for borrowers, as well as find ways to further enhance a coordinated and consistent housing market that provides for the greatest access to sustainable mortgage finance credit.

We wish you the best in your transition to HUD Secretary and look forward to working with you once you are confirmed.


Lindsey D. Johnson

For a full PDF of this letter, click here.


Letter: USMI Joins Black Homeownership Collaborative Calling the Biden Administration to Include a Housing Assistance Fund in the American Rescue Plan

The Honorable Joseph R. Biden, Jr.
President of the United States
The White House
Washington, DC 20500

Dear President Biden,

Congratulations on your inauguration. We appreciate your leadership addressing the health and economic impact of COVID-19, and your announcement of comprehensive emergency assistance for the millions of Americans impacted by this crisis. Our organizations have formed a collaborative, or are stakeholders in the work of the collaborative, to achieve 3 million net new Black homeowners by 2030, which would increase the Black homeownership rate to more than 50 percent, a significant step towards closing the homeownership gap for people of color. Essential to this effort is reducing the number of Black households at risk of losing their homes as a result of the economic impact of the pandemic. We are writing to urge that the legislative proposal your administration sends to Congress include $25 billion in direct assistance for the millions of homeowners who are at risk of losing their homes due to the economic impact of COVID-19.

The American Rescue Plan proposal seeks to prevent “untold economic hardship for homeowners” by extending the foreclosure moratorium and continuing applications for forbearances on federally-backed mortgages. Mortgage forbearance is an important tool in avoiding foreclosure, particularly for the millions of homeowners who have lost their jobs through no fault of their own. We commend your support for additional assistance to renters and apartment owners. Low- and moderate-income renters do not have resources to pay past rent when they go back to work, making emergency rental assistance an immediate priority. But homeowners in the same position also need help now.

For residential homeowners, mortgage forbearance is an essential home retention tool for short- term financial hardships. Prolonged forbearance without assistance to reduce or pay off missed payments may not be enough to stave off foreclosure, particularly for households facing long- term reductions in income or with limited home equity. It is appropriate and essential for the federal government to extend the same missed-payment relief to these homeowners as renters, using the same income guidelines that exist in the current rental assistance program being administered by the Treasury Department.

We are requesting that you include a $25 billion Housing Assistance Fund, modeled on the Hardest Hit Fund, to provide funds to state housing finance agencies to help homeowners with COVID-19 hardships bring their mortgage loans current through targeted assistance. The funds would be used for mortgage payment assistance, utility payments, property tax assessments, and other support to prevent eviction, mortgage delinquency, default, foreclosure, or loss of utility services.

Importantly, this growing risk to homeownership has profound implications for people of color, who are especially at risk. In fact, the Black homeownership rate, which plummeted during the Great Recession, has never fully recovered. Black homeownership today is as low as it was in 1968 when the Fair Housing Act was passed. Our country cannot afford to see more damage done to minority homeowners.

According to the Mortgage Bankers Association, there are currently 3.8 million homeowners who are past due on their mortgage. Census Bureau Household Pulse Survey data for the period December 9-21 indicates that over half of these homeowners are people of color. One in five Hispanics and nearly a quarter of all Black mortgage holders reported being late on their mortgage. Our organizations are committed to increasing homeownership rates for all people of color and closing the homeownership gap, but we cannot do so when we continue to lose more homeowners to COVID-19-related financial hardships.

We respectfully request that the legislative proposal for the American Rescue Plan include $25 billion in funding for a Housing Assistance Fund.


Black Homeownership Collaborative Steering Committee Members

National Housing Conference
Mortgage Bankers Association
National Association of Real Estate Brokers
National Association of REALTORS® National Fair Housing Alliance
National Urban League

Other Key Stakeholders

Center for Community Progress
Commerce Home Mortgage
Community Home Lenders Association
Consumer Federation of America
Framework Homeownership
Guild Mortgage Comp
International Home Builders
Institute Home
Homeownership Alliance
HOPE (Hope Credit Union/Hope Enterprise Corporation/Hope Policy Institute)
Housing Assistance Council
Housing Partnership Network
Housing Policy Council
Local Initiatives Support Corporation (LISC)
Low Income Investment Fund
Manufactured Housing Institute
National Association of Affordable Housing Lenders
National Community Reinvestment Coalition
National Community Renaissance
National Community Stabilization Trust
National Council of State Housing Agencies
National Housing Resource Center
National NeighborWorks Association
New American Funding
New York Housing Conference
Prosperity Now
The Leadership Conference on Civil and Human Rights
Up for Growth Action
U.S. Mortgage Insurers

Cc: The Honorable Janet Yellen, Treasury Secretary-designate
The Honorable Marcia Fudge, Housing and Urban Development Secretary-designate
The Honorable Tom Vilsack, Agriculture Department Secretary-designate
The Honorable Susan Rice, Director, Domestic Policy Council
Mr. Brian Deese, Director, National Economic Council

For a full PDF of this letter, click here.

Press Release: Private Mortgage Insurers Support Federal Housing Finance Agency Proposed Rule for GSE New Products and Activities

USMI Applauds the Proposed Enhanced Transparency, Oversight, and Review and Encourages Rule Application to All Current Pilot Programs

WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, submitted its comment letter to the Federal Housing Finance Agency (FHFA) on its Notice of Proposed Rulemaking for New Enterprise Products and Activities, which seeks to replace the 2009 Interim Final Rule that established a process for the government sponsored enterprises (“GSEs” or “Enterprises”) to obtain prior approval for new products and provide notice for new activities.

“USMI is encouraged to see FHFA following its statutory responsibility to establish a much more transparent and appropriate process for considering and approving new GSE products and activities,” said Lindsey Johnson, President of USMI. “The Interim Rule was adopted after the 2008 financial crisis, and as the GSEs continued to play an important and even greater role in the housing market during conservatorship, they at times expanded into new activities that are outside of the secondary market, compete in areas already well-served by the primary market, and not consistent with their mission.”

In its comment letter, USMI welcomes the increased transparency outlined in the proposed rule and supports the inclusion of “pilots” in the criteria for identifying and assessing new activities and products at the GSEs. Considering that numerous prior pilots were developed without meaningful input and analysis from industry stakeholders, USMI believes it is important that the FHFA close the loopholes that could be used again to circumvent the objectives of the proposed framework. USMI urges the FHFA to direct the GSEs to halt all current pilots and, following the implementation of a final rule, require them to submit Notices of New Activity should they want to continue offering such products or programs.

USMI also highlights in its letter the importance of the approval framework ensuring that innovations at the GSEs do not disintermediate private capital and that new activities and products operate in a manner that is within the scope of the secondary market functions set forth in their congressional charters. USMI recommends that the proposed rule be revised to provide additional clarity for the FHFA’s assessment criteria for new activities and products at the GSEs, specifically:

  • The degree to which private market participants are meeting or could meet the needs of the market and consumers, and whether the new activity or product would disintermediate non-GSE market participants;
  • Whether the new activity or product would rely on limited or broad participation by market participants;
  • How certain market participants will be selected over others, whether the activity or product will be made available to other market participants on similar terms, and whether other participants would be harmed by engagement in the activity or product; and
  • Whether the new activity or product would present a conflict of interest for the GSEs, especially where anti-competitive concerns may be present.

“This rule is sound public policy, as it will enhance transparency and provide for the appropriate review of new GSE products and activities to best serve the housing finance system and ensure that government and taxpayers avoid unnecessary new risk,” continued Johnson. “It is imperative that the FHFA continue to establish and enhance its oversight of the GSEs, and this rule is a critical step to that end.”

USMI’s full comments on the FHFA’s proposed rule can be found here.


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.