Author: Chloe Plefka

Blog: Do the math – Buying a home now is possible

Posted on by Chloe Plefka

With record low housing supply and high inflation contributing to skyrocketing home prices, the barriers to owning a home may seem insurmountable. But buying a home in a sustainable, affordable way is possible with low down payment mortgage options. First-time and low- to medium-income homebuyers can qualify for mortgage financing without emptying their bank accounts and can keep some cash on hand for home improvements or a rainy-day fund.

Conventional home loans backed by private mortgage insurance (MI) have been available for borrowers for decades and helped nearly 2 million homebuyers in the past year purchase or refinance a mortgage. Private MI is a temporary cost that allows for a down payment as small as 3% of the purchase price. While some borrowers wait until they save 20% for a down payment, the added years of saving can translate to higher interest rates, more expensive home prices and lost home equity.

“Renters who are on the hunt to buy should do the math and consider what is best for them, because often they will find that purchasing with a low down payment mortgage provides buyers with an ability to access the market sooner, and ends up being a significant advantage for them,” said Lindsey Johnson, president of U.S. Mortgage Insurers (USMI).

In today’s market, it could take a family earning the national median income up to 21 years to save 20%, according to calculations by USMI.

If you are one of these renters looking to buy your first home but don’t have 20% down, don’t worry: you are not alone. According to the National Association of REALTORS® (NAR), the typical down payment in 2021 was 7% for first-time homebuyers and 17% for repeat homebuyers.

How can buying now save you money later?

Consider you want to purchase a $375,000 home, the median sales price for a single-family home in 2021, according to NAR. A 5% down payment is $18,750 versus $75,000 for 20% down. With a 740 credit score at today’s MI rates, your monthly MI payment would be about $157, which is included in your monthly mortgage payment until the MI can be canceled, usually after five years once you reach 20% equity in the home.

Due to robust home price appreciation (HPA) that came in at 17.5% for 2021, today’s $375,000 home will likely cost more in the years ahead. This will also have an impact on the necessary down payment and length of time required to save for it. There are other variables in the equation too, such as interest rates. As interest rates rise, so too can the cost of mortgage financing.

Not all low down payment mortgages are the same. Importantly, government-backed loans insured by the Federal Housing Administration (FHA) require at least a 3.5% down payment, an upfront charge that must be paid at closing or added to your loan balance, and the monthly insurance is permanent for the life of the loan.

There are many online mortgage calculators that can help. Check out lowdownpaymentfacts.org to learn more.

Letter: Joint Trades Letter on Enterprise Credit Score Model Framework

Posted on by Chloe Plefka

USMI submitted a comment letter to the Federal Housing Finance Agency (FHFA) in regards to the implementation of Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“the Act”). As FHFA prepares to implement the Act, we write to request that it provide additional data, a detailed transition plan that is subject to stakeholder input, and ample time for any transition. This request need not delay FHFA’s decision regarding its review and approval of one or more credit score models, but instead would ensure that the transition to one or more new models is as smooth as possible. See here for the full letter.

Statement: Senate Confirmation of Julia Gordon as Federal Housing Commissioner

Posted on by Chloe Plefka

WASHINGTON — Lindsey Johnson, President of U.S. Mortgage Insurers (USMI), issued the following statement on the Senate’s confirmation of Julia Gordon to serve as Assistant Secretary for Housing, Federal Housing Commissioner, Department of Housing and Urban Development (HUD):

“USMI welcomes the confirmation of Julia Gordon to serve as Federal Housing Administration (FHA) Commissioner. In Commissioner Gordon, America gains an accomplished leader with broad experience in the housing finance system, who has specialized in supporting affordable homeownership and consumer protection policies for underserved markets. Her confirmation comes at a critical time as many homeowners, renters, and residents supported by the FHA continue to experience pandemic-related hardships and families face barriers to homeownership due to severely limited supply and record home price appreciation.

“The FHA is an important piece of the housing finance system that helps provide affordable housing opportunities to moderate- and low-income borrowers, and we are confident that Commissioner Gordon will be a strong steward of the agency’s government-backed mortgage lending program. USMI and our member companies look forward to working closely with Commissioner Gordon in seeking ways to establish a more complementary, collaborative, and consistent housing policy between the conventional and FHA markets that we serve.”

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

Statement: 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.

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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.

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.

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

Letter: Comments on FHFA’s 2022-2026 Strategic Plan

Posted on by Chloe Plefka
On March 11, 2022, USMI submitted a comment letter to the Federal Housing Finance Agency’s (FHFA) Acting Director Sandra Thompson on the agency’s draft Strategic Plan for Fiscal Years 2022-2026. USMI supports the overarching goals articulated in the Strategic Plan to: (1) secure the government sponsored enterprises’ (GSEs) safety soundness; (2) foster housing finance markets that promote equitable access to affordable and sustainable housing; and (3) responsibly steward the FHFA’s infrastructure. USMI offered additional recommendations and observations, including that FHFA should work in concert with the Federal Housing Administration (FHA) to ensure that pricing promotes borrower choice and allows the GSEs to advance access and affordability in the housing finance system, and that FHFA should implement policies that allow industry participants and consumer advocate organizations to serve as partners to the GSEs on initiatives that aim to promote equitable housing, address barriers to homeownership, and continue prudent risk management. Read the full letter here.

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.

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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)