Member Spotlight: Q&A with Brad Shuster of National MI

USMI’s member spotlight series focuses on how the private mortgage insurance (MI) industry works to address several critical issues within the housing finance system, including expanding access to affordable mortgage credit for first-time and minority homebuyers, protecting taxpayers from mortgage credit risk, and recommendations on ways to reform and enhance the housing finance system to put it on a more sustainable path for the long-term.

This month we chat with Brad M. Shuster, National MI’s Founder, Executive Chairman of NMI Holdings, Inc., and Immediate Past Chairman of USMI’s Board. Founded in 2012, National MI was built to serve borrowers, mortgage lenders, and the housing industry by helping more families achieve affordable and sustainable homeownership. The company continues to implement innovative risk management strategies to ensure lenders’ confidence and help borrowers qualify for low down payment mortgages. National MI consistently demonstrates a track record of strong performance and growth while delivering innovative mortgage solutions.

Below, Mr. Shuster discusses National MI’s views on what the housing finance industry should focus on to ensure access for first-time homebuyers as home prices continue to rise and demand remains robust. He also talks about the findings of the 2021 NextGen Homebuyer Report and how demographic changes are shaping the mortgage industry.               

(1) Home-price growth reached a record high in the third quarter of 2021, and demand from homebuyers remains robust despite rapidly increasing home prices. What do you think the housing finance industry should do or focus on to improve first-time homebuyers’ access to the housing market?

We are seeing more and more first-time homebuyers enter the housing market. Housing continues to remain strong and as a result, we are seeing an imbalance of supply and demand in the market, creating entry barriers to prospective homebuyers.

While strong House Price Appreciation (HPA) is great for current homeowners, it creates a moving target for those looking to transition from renting to owning. We see historically low supply, especially in the starter home segment of the market. According to the National Association of Home Builders (NAHB) there was only 2.1 months of supply for existing homes as of November 2021. And a recent National Association of REALTORS® (NAR) report said that housing affordability will be an increasingly important consideration for buyers, but with rents rising by 18.5 percent, buying may be the relatively more affordable housing option for some.

Now more than ever, there is a societal need to help qualified borrowers use private mortgage insurance to achieve the dream of homeownership affordably, responsibly and sustainably, and we take that role very seriously.

The housing finance industry should focus on educating homebuyers about all of the options available for mortgage financing. It is critical that younger, first-time and minority homebuyers – who often lack the resources or intergenerational wealth to afford a 20 percent down payment – are aware of the availability of lower down payment mortgages made possible by the support of private MI.

The industry also needs to educate potential homebuyers on the significant benefits of purchasing a home sooner with a low-down payment, rather than waiting many years to save up for a bigger down payment. Buying a home earlier means that the homeowner can begin to build equity and long-term wealth rather than waiting to enter the market.

The increase to the government-sponsored enterprises (GSEs) conforming loan limits for 2022 recently announced by the Federal Housing Finance Agency (FHFA) will also help open up the market, particularly in high-cost areas.

The private MI industry is well-positioned to help meet the needs of consumers and to drive responsible growth in the mortgage market by facilitating access to sustainable low down payment loans for millions of mortgage-ready borrowers. As part of that effort, our industry is working to raise consumers’ awareness of all mortgage financing options available.

(2) In October 2021, National MI collaborated with Cultural Outreach and the Mortgage Bankers Association (MBA) to study NextGen (ages 22-37) homebuying and economic trends. The 2021 NextGen Homebuyer Report found that this generation exhibits different spending patterns and has a lack of understanding about the homebuying process, especially around down payment and income requirements. Could you tell us more about these trends? What patterns are this generation following when it comes to buying a home? Why do you think that is the case?

National MI is committed to expanding homeownership to all segments of the market, and our work with Cultural Outreach and the MBA on the NextGen Homebuyer Report is an important step in that direction. The NextGen population is significant: it accounts for one out of every three home purchases. The report uncovers the challenges and concerns this group of consumers has about entering the housing market.

The 2021 survey revealed that many NextGen future buyers are unsure whether purchasing a home is a good investment. NextGen buyers also indicate that COVID-19 has had a significant impact on their plans to purchase a house. They perceive a lack of information on personal finance and mortgage loans, so they increasingly are performing their own research, turning to their personal networks as one source.

That provides further evidence that the mortgage finance industry needs to do more to educate the NextGen segment of potential homebuyers on what it takes to be “mortgage-ready” and about their different low down payment options. In particular, we need to dispel the myth that to purchase a home, you must have a 20 percent down payment. In fact, the report indicates that more than half of the survey respondents mistakenly believe that they need to save 20 percent for a down payment. By raising awareness of mortgage financing options available with private MI, many NextGen consumers could come to realize that that homeownership may be closer than they think. 

USMI’s most recent “MI In Your State Report” provides an analysis of how long it could take for a borrower to save 20 percent compared to a 5 percent down payment. The report found that saving for a 20 percent down payment could take potential homebuyers 21 years — three times the length of time it could take to save for a 5 percent down payment with private MI. For example, for a household earning the 2019 national median income of $68,703, it would take 21 years to save 20 percent, plus closing costs, for a single-family home. That number increases to 26 years for a Hispanic household and to 32 years for a Black household. Private MI can help reduce that timeframe to seven years. That is quite a difference.

(3) National MI hosted two webinars (here and here) on what diversity means in the mortgage industry, which you presented in collaboration with Tony Thompson from the National Association of Minority Mortgage Bankers of America (NAMMBA). Can you share insights into where our industry is today and how it can leverage diversity as a competitive marketplace advantage?

The newest generation of homebuyers is more diverse than previous generations in terms of race, gender, and socioeconomic status. National MI’s training platform offers relevant educational topics to our lender customers, and part of our success has been quickly shifting and refreshing what we offer to address an evolving set of customer needs. Since the data increasingly shows mortgage consumers are young and diverse, the mortgage industry needs to catch up to the new marketplace, especially in gaining skills and seeking guidance in media and training resources to reach the growing market of new homebuyers. Collaborating with industry partners such as NAMMBA enables us to move the conversation forward.

It is also important that companies take steps to make sure their workforces reflect the diversity in the population of homebuyers. When making one of the biggest financial decisions of their lives, consumers may feel more comfortable working with people who look like them and have a similar culture and background. 

Still, the real estate finance industry has made great strides to promote diversity, equity and inclusion (DEI). At National MI, DEI is one of our core values and has always been a part of our company culture. Our efforts to further diversity, equity and inclusion guide us both internally and externally as we work to partner with diverse customers, clients and vendors by providing innovative products and value-driven services.

Brad M. Shuster’s Biography

Brad M. Shuster has served as Executive Chairman of the Board of NMI Holdings, Inc. since January 2019. He founded National MI in 2012 and served as Chairman and Chief Executive Officer of the company from 2012 to 2018.

Prior to founding National MI, Mr. Shuster was a senior executive with The PMI Group, Inc., where he served as President of International and Strategic Investments and Chief Executive Officer of PMI Capital Corporation. Before joining PMI in 1995, he was a partner at Deloitte LLP, where he served as partner-in-charge of Deloitte’s Northern California Insurance and Mortgage Banking practices.

Mr. Shuster holds a B.S. from The University of California, Berkeley and an MBA from The University of California, Los Angeles. He has received both CPA and CFA certifications.

Member Spotlight: Q&A with Mark Casale of Essent

USMI’s member spotlight series focuses on how the private mortgage insurance (MI) industry works to address several critical issues within the housing finance system, including expanding access to affordable mortgage credit for first-time and minority homebuyers, protecting taxpayers from mortgage credit risk, and recommendations on ways to reform and enhance the housing finance system to put it on a more sustainable path for the long-term.

This month we chat with Mark A. Casale, Chairman, President and CEO at Essent Guaranty, and Vice Chairman of USMI’s board. Essent, founded in 2008, offers private MI for single-family mortgage loans in the United States, providing private capital to mitigate mortgage credit risk for lenders and investors, allowing lenders to make additional mortgage financing available to prospective homeowners. To better execute Essent’s core purpose to ensure borrowers have access to sustainable mortgage credit, Essent remains focused on managing mortgage credit risk, enhancing the business model of the private MI industry, and strengthening private MIs as counterparties to the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, lenders, and other stakeholders.

Below, Casale discusses 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.             

(1) Given the importance of low-down payment financing in the housing finance system and considering the competitive real estate market, what steps do you think the industry should take in the next year or two to better serve first-time buyers?

The 2021 housing environment has been strong as low interest rates continue to boost refinance and purchase market activity. However, a meaningful lack of housing supply has impacted affordability.

Millennials ―around 80 million strong― continue to contribute to the favorable demand dynamics. Driven by significant life events such as marriage and children, an increasing number of millennials are forming households, and continuing to provide strength to first-time homebuyer demand.

Millennials, and especially Hispanics, which represent 20 percent of this important segment of our population, are projected to be the dominant population and primary drivers of new homeownership for years to come; and we can already see the significant impact they are having on the real estate market and demand for housing.

Given this context, as more millennial homebuyers enter the market, it will be critical for the industry to improve consumer access to affordable credit, especially to first-time, younger and minority homebuyers, who may not have the resources or intergenerational wealth to afford the standard 20 percent down. Private MI companies are an important supporter of affordable, low down payment mortgages, helping more homebuyers get into homes and on a path to building the long-term wealth associated with homeownership.

(2) Private MI has provided credit risk protection to lenders and the GSEs for nearly 65 years, but our industry has also evolved to become stronger and more resilient. How does Essent describe its approach to risk management and credit risk transfer (CRT)?

Risk management has always been a key tenet for mortgage insurers because of the nature of our business of taking first loss credit risk on high loan to value loans. Post the Great Financial Crisis, risk management continues to evolve through new data sources, enhanced analytic tools and techniques, as well as the importance of quality control of the loan manufacturing process.

The ability to transfer credit risk to third parties in CRT transactions is an integral component of risk management for MI companies. The industry traditionally relied on reinsurance transactions and has completed over 30 transactions reducing loss exposure and making more capital available to support additional lending. Innovative leadership by the GSEs and the Federal Housing Finance Agency (FHFA) in the CRT market helped create a broader credit risk transfer market for mortgage insurers through the advent of Insurance Linked Notes (ILN). The MIs began utilizing ILN transactions beginning in 2015 and ILNs have since become a programmatic execution for MIs as a risk management hedging tool and a reliable source of capital. The industry has completed over 43 ILN transactions to date. The MI industry has transferred over $50 billion of risk in force via CRT.

CRT has transformed Essent and our industry from an old business model of “Buy and Hold” risk to a new business model of “Buy, Manage and Distribute” risk. We have approximately 85 percent of our $200+ billion insurance portfolio hedged via CRT as of 2021Q2. This model will make Essent, and our industry, more resilient during times of crisis, enhancing our ability to insure loans during all cycles while serving as strong counterparties to our customers and the GSEs.

(3) How will MI need to innovate and evolve as an industry in order to ensure future generations have access to affordable housing?

A competitive mortgage insurance industry backed by private capital serves the housing finance system very well. Today, over $1.3 trillion of mortgages are financed by loans with private MI. However, mortgage insurers have and will continue to evolve, particularly as technology enables key connection points with loan origination systems and our lenders. In the past 2 years, more refined risk assessment and pricing of risk has been an important evolution in the MI space. Currently, over 95 percent of lenders now get MI quotes from a proprietary risk-based pricing engine vs a legacy rate card. Essent expects more granular risk assessment and pricing to continue to improve by prudently leveraging machine learning and artificial intelligence with existing and new sources of data. We believe these approaches enable us to more accurately assess the risk of the loan and make more affordable credit available to borrowers that traditional approaches might have turned away. Fannie Mae recently announced a change to include rental payment history in Desktop Underwriter, a great demonstration of how incremental data can assist in improving the overall risk assessment of a transaction.

We strongly believe that the inclusion of more data to evaluate loans will be a differentiator that expands access to credit for qualified borrowers and delivers the best MI price available to prospective homeowners. These types of innovations align with FHFA’s stated goals of improving access and affordability as well as reducing racial inequality in homeownership. The MI industry will continue to be a valuable business partner to lenders and the GSEs in improving access and maintaining responsible lending standards so that our housing finance system provides sustainable homeownership.

Mark A. Casale’s Biography

Mark A. Casale is the founder, Chief Executive Officer and Chairman of the Board of Directors of Essent Group Ltd. (NYSE: ESNT). Mr. Casale has more than 25 years of financial services experience, which includes senior roles in mortgage banking, mortgage insurance, bond insurance and capital markets.

Founded in 2008 by Mr. Casale with $500 million of equity funding, Essent Group Ltd. has grown to a market capitalization of approximately $5 billion and manages more than $200 billion of insurance in force. Under Mr. Casale’s leadership, Essent has become a leading mortgage insurer and reinsurer serving as a trusted and strong counterparty to lenders and GSEs and has enabled over two million borrowers to become homeowners. Mr. Casale continues to evolve the franchise using risk-based pricing and AI-driven analytics to support his core mission of prudently growing shareholder value and promoting affordable and sustainable homeownership.

Mr. Casale also champions Essent’s philanthropic mission, supporting local and national organizations centered around children, housing, health, and education. He currently serves as a member of the Board of Trustees for St. Joseph’s University, La Salle College High School, and the Academy of Notre Dame de Namur.

A native of the Philadelphia region, Mr. Casale holds a BS in accounting from St. Joseph’s University and an MBA in finance from New York University.

Member Spotlight: Q&A with Rohit Gupta of Enact

USMI’s member spotlight series focuses on how the private mortgage insurance (MI) industry works to address several critical issues within the housing finance system, including expanding access to affordable mortgage credit for first-time and minority homebuyers, protecting taxpayers from risk in the mortgage finance system, and providing recommendations on ways to reform the system to put it on a more sustainable path for the long-term.

This month we chat with Rohit Gupta, President and CEO at Enact. Enact, previously known as Genworth Mortgage Insurance, is an operating segment of Genworth Financial that has provided MI products and services in the U.S. since 1981. Enact operates across all 50 states and the District of Columbia, working with lenders and other partners to help people responsibly achieve and maintain the dream of homeownership by ensuring the broad availability of affordable low down payment mortgage loans.

Gupta talks about the company’s new brand and how it is better positioned to serve low down payment borrowers and the first-time homebuyer market. He also discusses the housing supply and what the U.S. government can do to help increase homeownership.

(1) Your company recently changed its name yet remains committed to helping families across the country either purchase a home or refinance existing mortgages to lower interest rates. Can you speak to the important role that Enact and private mortgage insurance plays in the housing finance system?

You are absolutely correct! We did change our name to Enact, and along with our lending partners, we remain committed to helping more low down payment borrowers safely and affordably achieve the dream of homeownership. Over the years, we have built upon our trusted reputation for quality service, in-depth understanding of our customers’ business, best-in-class underwriting, and risk and capital management expertise through multiple housing cycles.

Private mortgage insurance (PMI) is imperative in order for borrowers with low down-payments to have access to home mortgage financing options. Our Chief Economist Tian Liu’s annual First-Time Homebuyer Market Report highlights how the housing finance system continued to perform well during the fourth quarter of 2020, as the PMI industry ensured access to credit for first-time homebuyers. Credit availability for potential first-time homebuyers can be especially vulnerable given this segment of the market relies heavily on low down payment mortgages. For the full year (2020), low down payment conventional mortgages backed by PMI financed approximately 900,000 first-time homebuyers, that’s a 25% increase from 2019. Even in the midst of the global COVID-19 pandemic, the mortgage industry quickly and successfully shifted a large number of employees from the office to working from home by leveraging technology. This ensured that qualified borrowers could continue accessing credit, while maintaining social distancing protocols. 

(2) Please tell us about your quarterly first-time homebuyer market report. Your last report highlighted how 2020 was an unprecedented year, resulting in a record number of first-time homebuyers. Why do you believe this was the case? And what should the industry continue to do or improve to keep first-time homebuyers accessing the housing market?

Our quarterly first-time homebuyer market report provides comprehensive coverage for the first-time homebuyer market, covering conventional, Federal Housing Administration (FHA), VA, USDA as well as the non-agency market. 2020 was a unique year because a number of factors came together – single-family homes became our office, children’s classroom, family’s restaurant, movie theater, and gym. Even as we start to see light at the end of the tunnel, homes will likely take on a bigger role for many people, making them more valuable to potential buyers.

Demographically, we’re also seeing the peak demand from the Millennial generation, the largest cohort in history. Cyclically, interest rates are at record-low levels, which supports housing affordability. Last year, the industry was instrumental in helping borrowers and lenders cope with record demand when shelter and safety were more important than ever for people, and we should continue to rely on technology and data to help potential first-time homebuyers. Our product makes a low down-payment possible, and today serves more first-time homebuyers than any other low down-payment mortgages. I believe that is something the industry should continue focusing on and sharing with the mortgage industry.

(3) The record-low housing supply is consistently increasing home prices. How is this affecting borrowers’ ability to purchase a home?

Today, rising home prices and the lack of inventory are major hurdles for homebuyers. Our industry has limited ability to influence housing supply, but we do and can play a role in making the down payment more affordable through our product. Also, we play an important role in educating borrowers on becoming responsible homeowners and lenders on our products to help their borrowers. Finally, we play an important role in keeping the mortgage origination and servicing process efficient, thereby lowering the cost to borrowers.

(4) Do you think this first-time homebuyer trend could persist? If so, why? And if not, what can the industry stakeholders and government do to ensure future generations can obtain the American Dream of buying a home?

I am optimistic about the first-time homebuyer trend because of its close relationship to homeownership. The COVID-19 pandemic has made homes and homeownership more important than ever. Even though demand continues to outpace supply, supply has been expanding. Housing starts have been over the 1.5-million-unit pace (the historical average) in seven of the past eight months. It will take some time for supply to catch up to demand, but I am confident that the housing industry will be able to deliver.

Rohit Gupta’s Biography

Rohit Gupta, President and CEO of Enact, is passionate about helping more people responsibly achieve and maintain the dream of homeownership. Rohit works with lenders, regulators, and policy leaders to advocate for the value of mortgage insurance to a sustainable housing finance system.

Along with his advocacy, Rohit served as chairman and remains a Board member of the U.S. Mortgage Insurers trade association. He also serves on the Boards of the Mortgage Bankers Association Residential Board of Governors and Housing Policy Executive Council. Additionally, Rohit is a catalyst for community change and serves as the chair of the Genworth Foundation Board, and a board member of American Cancer Society Triangle Leadership Council, and Pratham USA.

Prior to being named CEO, Rohit held the positions of Chief Commercial Officer & Senior Vice President of Products, Intelligence and Strategy, as well as Vice President – Commercial Operations. Rohit has an MBA in Finance from University of Illinois at Urbana Champaign and an undergraduate degree in Computer Science & Technology from Indian Institute of Technology. He resides in Raleigh, North Carolina with his wife and two children.

Member Spotlight: Q&A with Tim Mattke of MGIC

USMI’s member spotlight series focuses on how the private mortgage insurance (MI) industry works to address several critical issues within the housing finance system, including expanding access to affordable mortgage credit for first-time and minority homebuyers, protecting taxpayers from risk in the mortgage finance system, and providing recommendations on ways to reform the system to put it on a more sustainable path for the long-term.

This month we chat with Tim Mattke, CEO at MGIC. MGIC is the principal subsidiary of MGIC Investment Corporation, which founded the private MI industry in 1957 and serves lenders in the U.S., Puerto Rico, and Guam. MGIC is proud to support its lender customers and help make homeownership attainable for borrowers who have lower down payments. As USMI has advocated, it is critical for individuals to have the right information and resources to understand what it means to be “mortgage ready.” That is why financial literacy is so important.

As we commemorate Financial Literacy Month, Mattke highlights the educational programs and tools MGIC has developed and sponsored to help potential homeowners better understand their options. These include:

  • Readynest, a consumer-focused website that breaks down the homebuying process, provides tips, and showcases real-life stories to help customers “find, afford and love a home” of their own.
  • MGIC’s “buy now vs. wait calculator,” which helps homebuyers explore their financial options.
  • Down Payment Connect, in partnership with Down Payment Resource which promotes education around down payment assistance (DPA) and connects homebuyers with DPA programs.

(1) April is Financial Literacy Month. How does MGIC approach financial literacy and help first-time homebuyers get ready for the mortgage process?

The homebuying and mortgage process can seem daunting, especially to those going through it for the first time. In fact, the 2021 Home Buyers and Sellers Generational Trends Report from the National Association of REALTORS® (NAR) showed that “understanding the process” was the most difficult step, after finding the right property, among those aged 22 to 40.

To help overcome this challenge, MGIC has provided homebuyer education for decades. Last year alone, over 100,000 people took our online tests in English or Spanish. More recently we launched a consumer site, Readynest, which reached over 2 million page views in 2020. Readynest’s goal is not to sell MGIC or MI, but rather to demystify the homebuying journey through relatable explanations and stories of others who have gone through the process. The site helps aspiring homebuyers understand how to get their finances in order and includes guides on budgeting, credit, managing student loans, and mortgage insurance.

In addition, we have begun doing more direct outreach, presenting at state and local Housing Finance Agency (HFA) events to consumer audiences. This summer we are partnering with the Boys & Girls Club of Greater Milwaukee to present “The Path to Homeownership” to current college students and recent graduates.

(2) What is MGIC’s message to renters who are interested in buying a home but aren’t sure they can?

Frequently, renters self-disqualify themselves before they even begin. Many have preconceived notions about what it takes to buy a home and how much they need to put down, and too often give up without even trying. Certainly, saving for a down payment and paying bills on time are smart financial moves, but renters may not know how much they need to save. Or they don’t understand that they can have student loan debt and still qualify to buy a home. Many times, they end up waiting longer than necessary, and that could end up costing them more in the long run.

Our “buy now vs. wait calculator” helps renters compare that cost of waiting. Unlike a buy vs. rent calculator, which we also offer, this calculator allows the renter to determine for themselves when the right time to buy might be, based on their specific situation. Like Readynest, this calculator is available in English and Spanish.

(3) Do you think renters appreciate that they can buy a home with a low down payment? Why do you think the common misconception that a borrower needs a 20% down payment is still around?

The 20% down payment myth is so deeply ingrained in the media that it isn’t surprising that so many potential borrowers are held back by this false concept. Many mortgage calculators start with a default of 20% down. Even NAR’s Affordability Index reinforces this concept by using a 20% down payment as the working assumption. It is imperative that we continue to point out that there are many paths to homeownership. If a potential homebuyer believes they need 20% for a down payment, they could unnecessarily delay their first home purchase by many years. During those years they may miss out on increasing equity in the home, and they will very likely pay more for the home they eventually purchase. Just as important, they defer the improved quality of life that comes with achieving their dream of homeownership.

(4) Last year MGIC announced it was partnering with Down Payment Resource to launch “Down Payment Connect,” a program designed to help lenders match potential homebuyers to down payment assistance (DPA) programs. Can you speak to how this tool educates homebuyers on DPA and the value of these programs?

Many potential homebuyers – especially Millennial, minority, and first-time homebuyers – face barriers to saving for a down payment for a variety of reasons, including rising rents, student loan payments, and lack of intergenerational wealth. DPA programs can enable access to conventional financing and homeownership for those borrowers who may need that help.

There are more than 2,400 DPA programs across the country. Keeping up to date on the ins and outs and eligibility for all these programs is a challenge even for seasoned loan officers. So, it is no wonder that many homebuyers can be overwhelmed when beginning to search for programs for which they may qualify – assuming they know such programs exist. Down Payment Connect has been a great partnership with Down Payment Resource, enabling lenders to match borrowers with DPA programs. This assistance could be the difference between a family buying their first home and remaining renters.

(5) What are a few steps federal policymakers can take to make home ownership more accessible and affordable for first-time homebuyers?

It is important that federal policymakers recognize the importance of low-down payment lending, especially for minority, lower-wealth, Millennial, and first-time homebuyers. The expanded use of targeted DPA programs is worth exploring to enable more families to become homeowners. Rep. Maxine Waters, the chairwoman of the U.S. House Financial Services Committee, recently released a draft bill to create a program to provide first-time, first-generation homebuyers with DPA. Targeted solutions like this could play a role in narrowing the racial homeownership gap and address longstanding inequities in access to homeownership.

Access to credit is one side of the coin for homeownership and supply is the other side. In today’s environment, borrowers looking to capitalize on low interest rates are often boxed out of homeownership due to the lack of affordable housing supply. Policymakers should explore ways to reduce regulatory red tape regarding new home construction, or incentivize increased remodeling and rehabilitation of distressed properties, which are often located in central city neighborhoods. Taking measures like these could help increase affordable housing options and close the gap between demand and supply.

The shortage is especially acute in the lower end of the market where many first-time buyers are looking for “starter” homes. Housing supply is at the lowest level of this century, with just two months of supply as of February 2021 according to NAR and the Urban Institute. The lack of supply in turn has led to record year-over-year Home Price Appreciation (HPA), which was 10.8 percent last year according to the Federal Housing Finance Agency (FHFA). Strong HPA is great for current homeowners, but it creates a moving target for those looking to transition from renting to owning.

(6) Considering MGIC’s unique position as the first private MI company, in your opinion, how has private MI improved the housing finance system and homebuying process since 1957?

In many ways, private MI is the original down payment assistance program. We fundamentally changed the conversation when it came to buying a home. Prior to MGIC and the private MI industry in 1957, unless a person relied on the government and the Federal Housing Administration (FHA), the focus by lenders was to increase the amount of equity in the property to help reduce potential losses that may arise from a foreclosure. So, the question lenders would ask is “how much money do you have?” to put down when buying a home. Private MI helped remove or reduce this barrier, changing the conversation to “how much could you afford?” as it “created” the equity lenders sought.

We are able to facilitate access to affordable, low down payment mortgages by providing critical risk protection for lenders, the government sponsored enterprises (GSEs), and American taxpayers. Private MI companies work to not only get buyers into homes, but to keep them there so they may build the long-term, generational wealth that is associated with homeownership.

Since 1957, the private MI industry has helped 35 million homeowners either purchase a home or refinance an existing mortgage, including more than 2 million borrowers in 2020 alone, with nearly 60 percent of purchase loans going to first-time homebuyers.

Tim Mattke’s Biography

Timothy J. Mattke is Chief Executive Officer of MGIC Investment Corporation and MGIC. He joined the company in 2006. Prior to his appointment as CEO, he served as MGIC’s Executive Vice President and Chief Financial Officer from 2014 to 2019, and Controller from 2009 to 2014. Before then, he held other positions within the Accounting and Finance departments. Before joining MGIC in 2006, Mr. Mattke was an Audit Manager with PricewaterhouseCoopers LLP. He has a BBA from the University of Wisconsin-Madison, as well as a Master of Accountancy from that University; and he is a CPA.

Mr. Mattke currently serves as the Board Chair of Goodwill Industries of Southeastern Wisconsin, Inc., and is the Board Chair for the United Performing Arts Fund (UPAF). He also sits on the fundraising committee of SecureFutures and the Advisory Board for the Accounting Department at the University of Wisconsin-Madison.

Member Spotlight: Q&A with Derek Brummer of Radian

USMI has launched a new series that will spotlight one of our members every couple of months. For more than 60 years, private mortgage insurers have enabled more than 33 million low- to moderate-income Americans to attain affordable and sustainable homeownership in the conventional market.

The member spotlight series will focus in how the industry works to address several critical issues within the housing finance system including expanding access to the affordable mortgage credit for first-time and minority homebuyers, protecting taxpayers from undue credit risk, ensuring ample capacity for risk sharing with mortgage insurance (MI), and providing recommendations on ways to reform the system to put it on a more sustainable path for the long term.

First up in our series is a Q&A with Derek Brummer, President of Radian’s Mortgage Business and Chairman of USMI’s Board. Radian’s roots were planted in 1977. Over the years, Radian has grown with various strategic acquisitions to support the entire mortgage and real estate services lifecycle. It has built its business by keeping an eye on its ultimate purpose: making sustainable homeownership possible for more people, and it remains committed to removing barriers to homebuying. Brummer addresses the current state of the housing finance system, what policymakers can do to increase minority homeownership, and how Radian serves low down payment borrowers.

(1) How does Radian serve the first-time homebuyer market?

At Radian, we are committed to ensuring the American dream of homeownership responsibly and sustainably through products and services that span the mortgage and real estate spectrum. As a private mortgage insurer, we help low- and moderate-income borrowers who are not able to make a down payment of 20 percent to qualify for a conventional government sponsored enterprise (GSE) loan. In this important role, we offer a pathway for borrowers to obtain GSE loans, and therefore, greater optionality with respect to lenders that they may choose among, rather than being limited to the Federal Housing Administration (FHA) approved lenders. In our view, optionality is a key component of affordability and accessibility. In addition, our underwriting expertise allows us to serve as an important “second set of eyes” on credit risks, to ensure that borrowers who are ready to take the important step into homeownership are able to do so sustainably.

Last year, more than 1.5 million homeowners qualified to purchase or refinance their home thanks to private MI. Of these homeowners, nearly 60 percent were first-time homebuyers, and more than 40 percent had incomes below $75,000.

We believe there has never been a time that access to affordable and sustainable homeownership has been more important in our country, as we work together to support racial and economic equality and the very important role affordable homeownership plays in building wealth creation within diverse communities.

(2) What is your perspective on President Biden’s executive order to address racial equity through housing?

President Biden’s executive order signals an important commitment to furthering housing equity and redressing housing policies that have had a damaging impact on our society for far too long. The fact that the President signed it during his first week in office is indicative of the importance that the new Administration is placing on this issue. While homeownership has been on the rise over the past few years, and even increased during the COVID-19 pandemic, 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 the housing industry have the opportunity to correct inequities and sustainably increase minority homeownership.

U.S. Census data for the third quarter of 2020 shows that homeownership among White households stands at nearly 76 percent, compared to nearly 51 percent for Hispanic households, and 46 percent for Black households. These are disturbing statistics, and unless they are addressed systemically, they are unlikely to get better given the growing demographics of these populations within the United States. 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. We as an industry need to be working collaboratively with the government and other industry participants to identify and initiate tangible and measurable steps to sustainably expand homeownership for minority families. Fortunately, there is an eagerness across the housing policy sector to achieve these outcomes and the “North Star” here is directly aligned with our corporate purpose at Radian.

(3) Given Representative Marcia Fudge is likely to be confirmed by the U.S. Senate as the new Department of Housing and Urban Development (HUD) Secretary in the coming weeks. What do you think her top priorities should be?

First, we would like to pass along our congratulations to Rep. Fudge on her nomination. Once confirmed, she will take on an incredibly important job at a critical moment in time. She has laid out an ambitious and impactful set of priorities, from deploying a wide range of tools aimed at improving housing affordability, to reducing systemic inequities, to helping renters avoid eviction amid the COVID-19 pandemic. And that’s just for starters. Make no mistake: she will have a lot on her plate. But as she said in her confirmation hearing testimony, “These problems are urgent, but they are not beyond our capacity to solve.” We look forward to supporting her work.

(4) February is Black History Month. What is Radian’s message to Washington lawmakers and regulators about how we can more meaningfully increase Black homeownership and access to affordable mortgage credit?

This is a vital issue as we are still seeing Black homeownership rates lag behind those of the general population and other minority groups. One achievable starting point that we urge policymakers and industry participants to focus on right now is a robust education and assistance campaign that lays out the incredible benefits of homeownership and the steps that you need to take to get on the path to owning a home. There are many amazing trade associations and industry participants that would be happy to provide on-the-ground support to an effort like that, and it’s easy to see how, if we all work together, we could have a real, measurable and positive impact. An education campaign isn’t the only thing we need, of course, but lots of other necessary changes will take some time to enact, and this could be a great way to get things moving in the right direction right out of the gate.

Longer term, there are many items that require attention around this issue, such as how the housing finance industry assesses creditworthiness, preserving and enhancing borrower optionality between GSE and FHA loans, reducing the cost of conventional mortgages where feasible, and importantly, increasing the inventory of affordable housing within the U.S., which is at historically low levels and deserves bipartisan attention through infrastructure improvements and an evaluation of burdensome regulations that drive up the cost of building, and ultimately, homeownership.

Finally, all of these initiatives need to be supported by data to ensure the steps that are being taken are tailored to address the root causes of these problems and that solutions are being appropriately crafted to produce positive and sustainable progress.

(5) Radian is unique as it is constantly changing the status-quo within the mortgage and real estate services industry. How do the innovations at Radian help the homebuyer?

At Radian, we are building on a longstanding culture of innovation and have grown our mortgage credit risk expertise into a full-service mortgage and real estate services powerhouse.

Another example is how we are leveraging our data, analytics and artificial intelligence (AI) to change the future of home valuation. We use our AI photo recognition engine to give us current property condition reports. These condition reports will enhance the quality and accuracy of the final property valuation process. We can also monitor property condition over time using time series data and trending to track property improvement. By implementing this AI-driven technology, we have the opportunity to increase the velocity, accuracy and quality of evaluation process. There are several other use cases we are working on to improve the home purchase experience and offer a seamless experience to a prospective homebuyer.

Derek Brummer’s Biography

As president, mortgage, for Radian Group Inc., Brummer is responsible for overseeing the company’s Mortgage Insurance and Mortgage Risk Services businesses, including developing strategies for continued growth as the mortgage industry evolves.

Derek joined Radian in 2002 and served as Radian’s 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. Prior to joining Radian, Derek was a corporate associate at Allen & Overy; and Cravath, Swaine & Moore, both in New York.

Derek holds a bachelor’s degree from the University of Nebraska at Lincoln and a J.D. from New York University School of Law.