News Filter: Newsletter

Newsletter: April 2017

Posted on by Rhina Portillo

Here is a roundup of recent news in the housing finance industry. USMI’s Lindsey Johnson interviews USMI Board Chairman Patrick Sinks on the 60th anniversary of the private mortgage insurance (MI) industry. Additionally, a recent congressional bill aimed at promoting greater transparency at Fannie Mae and Freddie Mac (the GSEs) was passed by the House of Representatives, President Trump announced his nomination for Deputy Secretary of the Department of Housing and Urban Development (HUD), and the Mortgage Bankers Association (MBA) released a new report on reform recommendations for the GSEs and housing finance system.

  • Private Mortgage Insurance Industry Turns 60. This week, USMI published a Q&A between USMI President and Executive Director Lindsey Johnson and USMI Chairman and Mortgage Guaranty Insurance Corp. (MGIC) CEO Patrick Sinks. In their discussion, Johnson and Sinks discuss the past, present, and future of the MI industry, and how MI has helped people affordably become homeowners for 60 years.
  • House Bill Aims to Open GSE Records to FOIA. This week, the House of Representatives passed H.R. 1694, the Fannie and Freddie Open Records Act of 2017, by a unanimous vote. H.R. 1694, introduced by Rep. Jason Chaffetz (R-UT), would mandate Fannie Mae and Freddie Mac to accept and process Freedom of Information Act (FOIA) requests from the public, and release information to satisfy FOIA requests as long as they remain under federal conservatorship.
  • President Trump Announces Deputy Secretary of HUD Nomination. Today, President Trump announced the nomination of Pamela Patenaude to be Deputy Secretary of HUD. Patenaude is currently the President of the J. Ronald Terwilliger Foundation for America’s Families and previously served as Director of the Bipartisan Policy Center Housing Commission. USMI issued the following statement on Patenaude’s nomination:“Pam Patenaude is a strong choice to serve as Deputy Secretary for HUD. Throughout her career, she has been a proven leader on housing issues and will bring a wealth of knowledge and experience to the agency. USMI looks forward to working with Pam on the important issues facing the housing finance industry.”
  • MBA Releases New Report on Reform Recommendations for GSEs and Housing Finance System. This week, MBA released a report outlining its recommendations to reform the GSEs and the housing finance system. The report covers many areas such as the value of loan-level credit enhancement and the benefit of private MI, as well as promotes greater use of front-end credit risk sharing including through private MI. The report also recognizes the important functions of private market participants and reinforces that there should be a bright line between the functions of private market participants in the primary market and those of secondary market participants. In a statement on the report,  USMI President Lindsey Johnson said:“USMI is pleased to see MBA and other industry, trade and consumer groups provide ideas and proposals for how to reform the housing finance system and we look forward to continuing to work with MBA and others to promote reforms to the housing finance system to put more private capital in front of taxpayer risk and to create a more sustainable housing finance system that works for market participants, taxpayers and consumers. For 60 years, MI has provided effective credit risk protection for our nation’s mortgage finance system. This time-tested form of private capital should be the preferred method of absorbing credit loss in front of any government guaranty, helping to minimize taxpayer risk while ensuring mortgage credit remains accessible.”

Newsletter: March 2017

Posted on by Rhina Portillo

Here is a roundup of recent news in the housing finance industry, including a blog post by USMI Chairman Patrick Sinks on the value of enhanced lending standards and practices, the release of a new column explaining low down payment mortgage options, a report on the Federal Housing Administration’s (FHA) exposure to risky loans, and the Federal Housing Finance Agency’s (FHFA) response to criticism over the GSEs’ entrance into financing single-family rental homes:

  • USMI Chairman Writes on Lending Standards. In a recent blog post by Patrick Sinks, the President and CEO of MGIC and Chairman of USMI, he argues that the federal government must balance important protections provided by new lending standards with reasonable consumer access to credit. Sinks also says that there must be uniform lending standards in the housing finance industry to promote consistency in the market. Sinks writes:“The safeguards that came into the marketplace for borrowers, lenders, investors, and ultimately taxpayers with the implementation of the QM standard have been helpful in improving the credit quality of the housing market in the United States… The QM rule has and will continue to be a solid foundation for responsible underwriting and borrowing in our housing system. As new housing policy or reforms to existing policies are considered, it is important that the foundations of the QM rule remain intact while also balancing the need to ensure creditworthy borrowers aren’t unnecessarily or unintentionally left on the sidelines.”
  • New Column on Low Down Payment Mortgages. A new column has been released that gives consumers the “lowdown” on low down payment mortgages. The column explains the options available to potential homebuyers who can’t afford a 20 percent down payment, giving them the pros and cons of several mortgage loan options.
  • Riskier Borrowers Make Up Growing Share of Government-Backed FHA Loans. According to USA Today, riskier borrowers are making up a growing share of new mortgages backed by the FHA, which have been pushing up delinquencies and raising concerns about a spike in defaults that could harm the housing recovery.In addition, the Inspector General for the Department of Housing and Urban Development (HUD) released a report that found HUD failed to adequately oversee billions of dollars of risky FHA loans, thereby putting the FHA’s Mutual Mortgage Insurance Fund at greater risk.
  • FHFA Director Mel Watt Defends Fannie Mae Deal with Blackstone. Politico Pro(subscription required) reported that FHFA Director Mel Watt is defending the $1 billion deal between Fannie Mae and private equity firm Blackstone to guarantee the company’s loans on 50,000 single-family rental units. Watt defended the deal in letters to the National Association of Realtors and House Democrats, each of whom have written letters to the FHFA expressing their opposition to the deal. According to Bloomberg News, Freddie Mac may also move toward backing loans that finance single-family rental (SFR) homes.

Newsletter: March 2017

Posted on by Rhina Portillo

Here is a roundup of recent news in the housing finance industry, including the unveiling of USMI’s new logo to commemorate 60 years of making homeownership possible through private mortgage insurance and housing policy developments in Congress and in the executive branch.

  • The private mortgage insurance industry turns 60. USMI unveiled its new logo to commemorate 60 years of private mortgage insurance (MI) making homeownership possible for millions of Americans. Since 1957, private MI has served as a reliable and affordable method of expanding homeownership, while simultaneously protecting American taxpayers and the government from exposure to mortgage credit risk. Stay tuned for more activities!
  • USMI and others send letter to Congress on g-fees. Scotsman Guide reported on a letter sent by USMI and 13 other industry trade groups to Reps. Mark Sanford (R-SC) and Brad Sherman (D-CA) on a bill they introduced to ensure that guarantee fees (g-fees) charged by Fannie Mae and Freddie Mac (the “GSEs”) are used solely to insure against the credit risk of home mortgages. In 2016, the mortgage finance industry successfully fought off a legislative proposal to use g-fees collected by the GSEs to fund highway projects. The letter reads: “G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from loans that default. Increasing g-fees for other purposes imposes an unjustified burden on homeowners who would pay for any increase through higher monthly payments for the life of their loan. … whenever Congress has considered using g-fees to cover the cost of programs unrelated to housing, we’ve informed lawmakers that homeownership cannot, and must not, be used as the nation’s piggybank. By preventing g-fees from being scored as a funding offset, H.R. 916 gives lawmakers a vital tool to prevent homeowners from footing the bill for unrelated spending. We are grateful to you for introducing this bipartisan legislation and urge its consideration by the House.”
  • Carson confirmed as HUD Secretary. On March 2, Dr. Ben Carson was confirmed as the new Secretary for the Department of Housing and Urban Development (HUD). USMI released a statement congratulating Secretary Carson on his confirmation and welcoming the opportunity to work with the Secretary and his team to promote a stronger and more equitable mortgage finance system, as well as an expanded role for private capital.
  • Investopedia has good video explaining MI. USMI’s website features a new video courtesy of Investopedia to help people better understand what private MI is and how it helps people who cannot afford a 20 percent down payment to buy a home. To watch the video, click here.

Newsletter: February 2017

Posted on by Rhina Portillo

Here is a roundup of recent news in the housing finance industry, including USMI’s release of its 2017 policy priorities and housing finance reform principles, industry outreach to the Federal Housing Finance Agency (FHFA) on GSE activities, and the recent news of increases in Federal Housing Administration (FHA) mortgage delinquencies:

  • USMI released housing finance reform principles that address ways the housing finance system can be put on a more sustainable path. These principles allow creditworthy borrowers to have access to affordable mortgage credit without exposing taxpayers and the government to housing related credit risks. These principles include:
    • Protecting taxpayers by allowing private capital to absorb all credit losses in front of any government guaranty
    • Promoting stability in a reformed housing finance system
    • Ensuring accessibility to mortgage finance for creditworthy borrowers and participation by lenders of all sizes and types
    • Fostering transparency through a consistent and coordinated approach to the federal governments’ housing policy among all agencies and entities
  • USMI released its public policy priorities for 2017, which are dedicated to fostering sustainable homeownership while significantly limiting credit risk to taxpayers and the government. These policy priorities include:
    • Enabling access to homeownership and affordable mortgage credit with MI
      • Setting and using GSE fees
      • Extending and preserving tax deductibility of MI
    • Reducing taxpayer risk with MI
      • Establishing coordinated housing policy
      • Establishing complementary roles for the Federal Housing Administration and MI
      • Strengthening the role of MI in comprehensive reform legislation
      • Expanding the use of “Deeper Cover” MI in GSE-risk sharing
  • In a joint letter, USMI and eight other financial trade groups wrote to FHFA Director Mel Watt and urged the agency to engage with industry stakeholders before moving forward with evaluating new or alternative credit score models used by Fannie Mae and Freddie Mac for conventional mortgage loans. The joint letter reads:“As the Federal Housing Finance Agency (‘FHFA’) moves forward with evaluating new/alternative models, we request that FHFA engage more openly and broadly with industry through a public forum, provide relevant data and information from the Enterprises to help inform industry participants about the potential impact of new credit score models, and share your assessment of fair lending risks posed by contemplated changes. … Given the significant implications that the various options could have on borrowers and our industries, our associations urge FHFA to broaden the input from key industry participants to help reach the most suitable option to expand credit while promoting sustainable homeownership.”
  • The National Association of Realtors (NAR) sent a letter to FHFA Director Mel Watt regarding the recent news that Fannie Mae will obtain a billion dollars’ worth of loans to finance its purchase of single family homes that will be rented out in markets with limited supply. The letter states:“Rather than focusing on allowing well-qualified Americans to build wealth through affordable mortgages options, Fannie Mae is actively financing large institutions to compete with them. These investors do not expand the affordable housing stock. Rather, in this limited market they drive up the price of rents and remove affordable inventory from the hands of American homeowners. … At a time of a historically low homeownership rate, our nation needs the GSEs to bolster homeownership opportunities for millions of responsible, middle class American families, not funding special interest deals with Wall Street financial firms that take away those opportunities.”Several House Democrats also wrote a letter to Director Watt expressing their concerns over the deal, which they say chases profits at the expense of Fannie Mae’s primary mission of boosting U.S. homeownership.
  • The House Financial Services Committee issued a statement regarding the spike in delinquencies on mortgages backed by the FHA at the end of 2016. Mortgage delinquencies at the FHA jumped in the 4th quarter of 2016 for the first time since 2006, with the delinquency rate increasing to 9.02 percent. In the statement, Chairman Jeb Hensarling stated that the data “makes it clear that President Trump was absolutely right to undo the previous administration’s irresponsible action.”

Newsletter: December 2019

Posted on by Rhina Portillo

Here is a roundup of news surrounding recent developments in President-elect Donald Trump’s housing policy, key legislative proposals and also reports on the benefits of front-end credit risk sharing with deep cover mortgage insurance, and a new USMI blog post on unnecessary upfront risk fees (loan-level price adjustments) imposed by Fannie Mae and Freddie Mac:

  • Nominee for Secretary of Housing and Urban Development Announced. Earlier this week, President-elect Donald Trump announced that he would nominate Dr. Ben Carson as his Secretary of Housing and Urban Development.
  • GSE Credit Risk Transfer Legislation Introduced in Congress. HousingWire and American Banker report that on December 8 Reps. Ed Royce (R-Calif.) and Gwen Moore (D-Wisc.) introduced a new bill in the House of Representatives that would require the GSEs to offload more credit risk onto the private sector. The Taxpayer Protections and Market Access for Mortgage Finance Act of 2016 (H.R. 6487) seeks to require Fannie Mae and Freddie Mac (GSEs) to transfer more credit risk through front-end credit risk transfer (CRT) transactions to mitigate losses and risks to taxpayers and the federal government. In addition to other provisions, H.R. 6487 calls for a five-year pilot program to increase the amount of risk transferred away from the government before it reaches the GSEs’ balance sheets by using front-end CRT with private mortgage insurance (MI). This front-end MI-based CRT method is consistent with recommendations to the Federal Housing Finance Agency (FHFA) from USMI and others, and builds upon the current, effective use of private mortgage insurance in the GSE system that has been in practice for decades.
  • Treasury Secretary Nominee Calls for GSEs to Exit Conservatorship. In recent comments, President-elect Donald Trump’s nominee for Treasury Secretary, Steve Mnuchin, called for the GSEs to exit conservatorship, adding that government ownership of the companies displaces private capital in the housing finance system and that the Trump administration “will get it done reasonably fast.” President-elect Trump’s transition team noted that the need to structurally reform the GSEs has bipartisan agreement.
  • Housing Expert Extols Benefits of Front-End Credit Risk Transfer and Deeper Cover Mortgage Insurance. In a recent article, Faith Schwartz, a housing finance policy expert who has worked extensively with the federal government in the US housing market, wrote on the benefits of front-end credit risk transfer (CRT), including through the use of deeper cover mortgage insurance (MI). Schwartz notes that front-end CRT and deeper cover MI allow for greater transparency, more options in a counter-cyclical volatile market, inclusive institutional partners and borrower process, and allows the GSEs to reach their goals in de-risking their credit guarantee. Schwartz concludes her article by saying: “In summary, whether it is recourse to a lending institution or participation in the front-end MI cost structure, pricing this risk at origination will continue to bring forward price discovery and transparency. This means the consumer and lender will be closer to the true credit costs of origination. With experience pricing and executing on CRT, it may become clearer where the differential cost of credit lies. The additional impact of driving more front-end CRT will be scalability and less process on the back-end for the GSE’s. By leveraging the front-end model, GSE’s will reach more borrowers and utilize a wider array of lending partners through this process.”
  • Consumer and Civil Rights Groups Raise Concerns about LLPAs. The MReport writes that 21 groups sent a letter to FHFA Director Mel Watt and Treasury Secretary Jack Lew on December 8 “expressing concern that too many creditworthy low- and moderate-income borrowers are being denied access to mortgage credit.” These groups state that “The increase in the Enterprises’ guarantee fees and risk-based pricing (LLPAs) has had a number of effects to varying degrees that some predicted, including more banks are holding fixed-rate loans on portfolio, more financing of lower-credit score borrowers by the Federal Housing Administration, and fewer originations to the underserved overall.”
  • ICYMI: Lindsey Johnson writes on Loan-Level Price Adjustments (LLPAs). In a new blog post, USMI President Lindsey Johnson highlights the need for the reduction or elimination of upfront risk fees (LLPAs) based on a borrower’s credit score and down payment. In the blog, Johnson explains how this risk is already protected by private mortgage insurance, paid for by the homeowner. LLPAs, which were put in place in 2008, are increasingly unnecessary following the enactment of stronger underwriting standards for privately insured mortgages and in essence double charge a borrower for the same risk. Johnson encourages the FHFA and the GSEs to continue to work to manage risk, however LLPAs have become arbitrary fees that make homeownership more expensive or puts homeownership out of reach for many middle and lower income homebuyers. USMI was part of a group of 25 organizations that wrote a letter to FHFA Director Mel Watt in June calling for FHFA and the GSEs to reduce to eliminate LLPAs.

Newsletter: November 2016

Posted on by dcadmin

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Here is a roundup of a number of recent events surrounding the opportunities for comprehensive reform of the housing finance industry following the 2016 election, the health of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, and the future of Fannie Mae and Freddie Mac (GSEs) after conservatorship:

  • Opportunities for Housing Reform in New Administration. In an op-ed in National Mortgage News, Clifford Rossi highlights the opportunities for a comprehensive overhaul of the housing finance system following the historic 2016 election. Rossi notes that the new administration and Congress bring momentum and hope for comprehensive housing reforms and long-lasting changes in the secondary mortgage market, including reforming the GSEs and FHA. He cites “dramatically reducing the federal footprint in housing finance” and the implementation of a coordinated federal housing policy as key criteria for reform.
  • FHA Releases 2016 Annual Report. The FHA released its 2016 annual report to Congress highlighting the health of its Mutual Mortgage Insurance Fund (MMIF) for Fiscal Year 2016. In its response to the report, USMI stated:“Consistent with improvement in the overall mortgage credit market, we welcome the news that FHA’s single-family forward program and the home equity conversion mortgage (HECM) program are combined above the statutory required 2 percent capital ratio. Now that FHA’s single-family fund has climbed its way back, this moment presents an opportunity for the new Administration and lawmakers to consider a coordinated housing policy to ensure broad access to low down payment lending while reducing the government’s footprint in housing and protecting taxpayers.” 

    “The MI industry and FHA should serve complementary roles to promote broad and sustainable homeownership. To accomplish this, FHA needs to not only become more financially resilient, in line with the rest of the financial system, but also remain focused on its core mission of serving underserved communities. USMI stands ready to work with the new Administration and Congress to enhance a mortgage finance system that meets the needs of low down payment borrowers while protecting taxpayers.”

  • GAO Report on the Future of the GSEs after Conservatorship. The Government Accountability Office (GAO) released a report on the Federal Housing Finance Agency’s (FHFA) goals for the Fannie Mae and Freddie Mac conservatorships and the implication of FHFA’s actions for the future of the GSEs and the broader secondary market. The report urges Congress to consider legislation to establish objectives for the future federal role in housing finance and a transition plan to reform the housing finance system that enables the enterprises to exit conservatorship. This report is in response to an April 2016 letter from Sen. Richard Shelby (R-AL) requesting reports from GAO and the Congressional Budget Office on FHFA and the GSEs.
  • MBA, NAHB, NAR Send Letter to Congress. The Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors wrote a joint letter to Congress urging it to quickly act to renew a tax extenders package that includes provisions to provide certainty to the residential real estate market. The letter specifically calls for the extension of the mortgage debt forgiveness income exclusion and the mortgage insurance premium deduction. The deduction became effective in 2007 and is set to expire in 2016 unless Congress extends or makes it permanent. Tax savings associated with the mortgage insurance deduction can be a decisive factor for many prospective borrowers. In 2014, 4.2 million taxpayers benefited from deductions for mortgage insurance, with an average deduction of $1,403. The total amount of deductions claimed in 2014 was nearly $6 billion. 

Newsletter: December 2015

Posted on by dcadmin

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Recap: Making Housing Finance System More Sustainable and Reducing Taxpayer Exposure Through Increased Front End Risk Sharing

Last week, we saw several indications that momentum is growing to make the housing finance system more sustainable and reduce taxpayer exposure by further de-risking the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac with increased front end risk sharing, in particular, by expanding private Mortgage Insurance (MI) coverage.

  • Bipartisan members of Congress are urging FHFA to take additional steps to expand front end risk sharing. Representatives Stivers (R-OH) and Moore (D-WI) expressed concern over the “lack of balance between ‘front-end’ and ‘back-end’ risk sharing.”  And Representatives Luetkemeyer (R-MO) and McHenry (R-NC) sent a letter to FHFA urging them to “require the Enterprises to also explore and engage in diverse forms of front-end credit risk sharing.”  The House letters join a bipartisan Senate letter signed by Mark Warner (D-VA), Bob Corker (R-TN), Heidi Heitkamp (D-ND), Mike Crapo (R-ID), Jon Tester (D-MT), and Dean Heller (R-NV) which also encourages FHFA to expand and better define the development of credit risk transfer programs.
  • The Mortgage Bankers Association sent a letter to FHFA Director Mel Watt urging FHFA to require greater use of up-front risk sharing by the GSEs, particularly with deeper private mortgage insurance (MI) coverage, to de-risk loans before they are acquired by the GSEs.
  • Doug Holtz-Eakin of American Action Forum stated that de-risking the GSEs through greater use of private mortgage insurance (PMI) “represents a step toward finally resolving the structural flaws that contributed to the [financial] crisis.”
  • Respected analysts Laurie Goodman, James Parrott and Mark Zandi issued a joint paper – Delivering on the Promise of Risk Sharing – which provides a very thorough analysis of all the options, including up front risk sharing with MI.
  • USMI president Lindsey Johnson was in the news, with an op-ed in The American Banker and a Q&A in DS News, both on risk sharing.

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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.

 

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Newsletter: March 2015

Posted on by dcadmin

The recent decision by the Federal Housing Administration (FHA) to lower annual mortgage insurance premiums has renewed the debate about the complementary roles of private Mortgage Insurance (MI) and the FHA government mortgage insurance program.

Below are links to background materials on this topic and excerpts from a related hearing before the House Financial Services Committee Housing and Insurance Subcommittee, which included testimony by Rohit Gupta, President and CEO of Genworth Mortgage Insurance and Chair of U.S. Mortgage Insurers (USMI) and other housing finance experts.