USMI submitted a letter for the record for the U.S. Senate Committee on Finance’s March 7 hearing titled, “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” USMI has long supported the tax provision allowing a deduction for MI premiums paid in connection with a mortgage on a qualified residence and commends the bipartisan work on the Middle Class Mortgage Insurance Premium Act to make the deduction permanent and expand taxpayer eligibility. Since 2007, the MI deduction has been a powerful tool in prudently promoting homeownership for low- and moderate-income (LMI) families and has been claimed over 43 million times by qualified homeowners for an aggregate $61.6 billion in tax deductions. Click here to read the letter.
Resource Filter: Letters
Letter: Joint Trades Letter to House Ways and Means Committee in Support of MI Tax Deduction
Letter: Joint Trades Letter to Senate Finance Committee in Support of MI Tax Deduction
Letter: Statement to Senate Finance Committee Hearing, “The Role of Tax Incentives in Affordable Housing”
USMI submitted a statement for the record to the U.S. Senate Committee on Finance for its July 20 hearing, “The Role of Tax Incentives in Affordable Housing.” USMI writes “that there are tax policies that can be improved in order to help American family achieve the American Dream of homeownership. More specifically, we strongly support S. 3590, the Middle Class Mortgage Insurance Premium Act of 2022, a bipartisan bill introduced by Senators Maggie Hassan and Roy Blunt.” See here for the full letter.
Letter: Statement to House Committee on Ways and Means’ Hearing, “Nowhere to Live: Profits, Disinvestment, and the American Housing Crisis”
Letter: Joint Trades Letter on Enterprise Credit Score Model Framework
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.
Letter: USMI Calls for Senate Finance Committee to Co-Sponsor the Middle Class Mortgage Insurance Premium Act of 2022
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.
Letter: Comments to CFPB on HDMA Rule Assessment
USMI submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) in response to its Request for Information (RFI) on the assessment of the 2015 Home Mortgage Disclosure Act (HMDA) Rule. In the letter, USMI discusses the importance of the HMDA Rule in eliminating lender discrimination and its value in monitoring how regulatory changes impact who receives mortgages. USMI believes that the benefits of the HMDA Rule’s expanded reporting requirements, including for compliance personnel and technology systems, outweigh the incremental costs for mortgage lenders to comply with the rule. We encourage the CFPB to work with the FHFA to expand analytical capabilities by publicly releasing more granular loan-level mortgage origination data. Click here to read the full letter.
Press Release: Comment Letter on FHFA’s NPR on “Amendments to the Enterprise Regulatory Capital Framework Rule”
WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, today submitted a comment letter to the Federal Housing Finance Agency (FHFA) on its Notice of Proposed Rulemaking (NPR) on “Amendments to the Enterprise Regulatory Capital Framework (ERCF) Rule – Prescribed Leverage Buffer Amount and Credit Risk Transfer.” In its letter, USMI emphasizes the importance of setting appropriate, balanced, and analytically justified requirements for the government-sponsored enterprises (Enterprises), Fannie Mae and Freddie Mac, to simultaneously ensure their financial strength and borrowers’ continued access to affordable mortgage finance credit in the conventional market.
“We appreciate the work FHFA has undertaken to date to provide for minimum capital requirements for the Enterprises, including the December 2020 final rule to establish a post-conservatorship capital framework,” said Lindsey Johnson, President of USMI. “While a robust framework is necessary to ensure the stability of the housing finance system, overly stringent requirements or ones that inaccurately reflect the risks of the assets held by the Enterprises can be disruptive. It is critical FHFA creates a capital framework that strikes an appropriate balance between maintaining borrowers’ access to affordable mortgage credit and ensuring the Enterprises and taxpayers are protected from risk.”
In its comments, USMI writes the final rule ensures the Enterprises have sufficient levels of capital to withstand a steep economic downturn but recommends the following to FHFA:
- Adjust credit risk transfer (CRT) minimum risk weight floor to lower than 5 percent. USMI writes that any CRT floor should be designed to consider whether it will have the unintended consequences of discouraging the use of CRT or motivate CRT structures in which the Enterprises retain credit risk simply to justify the arbitrary capital floor. It urges FHFA to consider adjusting the CRT minimum risk weight floor lower than its proposed 5 percent change to a level closer to the statistically determined risk in a retained position to better align the CRT decisioning with the underlying economics and risks posed by the transaction. USMI also recommends FHFA establish and make public the model used to assess the CRT capital benefit, the statistical basis for any floor, and an analysis of the CRT capital treatment impact on the statutory goals of the Enterprises.
- Consider alternative methods to determine the Prescribed Leverage Buffer Amount (PLBA). USMI agrees that the PLBA needs to be adjusted, and that 1.5 percent is excessive, but it recommends FHFA consider alternative methods of determining the amount of the PLBA that more closely relate to risk than the Stability Capital Buffer. USMI writes that it emphatically agrees that the PLBA should not be the usual binding constraint on the Enterprises. However, the NPR does not explain why 50 percent of the Stability Capital Buffer is the appropriate standard. The Stability Capital Buffer itself is a subjectively determined capital requirement and no rationale has been provided for why 5 basis points times market share over 5 percent is chosen, how it is related to the risk, or why the threat to the national housing finance system is not adequately dealt with through the other elements of the ERCF.
- Reduce the single-family risk weight floor to 10 percent or less. USMI recommends the minimum 20 percent risk weight floor for single-family mortgages be reduced to 10 percent or less to more accurately account for the improvements in mortgage lending since the 2008 financial crisis, and to reflect and allow for credit enhancement, while also still requiring the Enterprises to hold an amount of capital against remote credit risk exposure more accurately. Reducing the single-family risk weight floor to 10 percent or less better achieves this outcome.
- Make changes to the Countercyclical Adjustment. While FHFA does not discuss in the NPR, USMI does comment on the Countercyclical Adjustment impact within the 2020 ERCF final rule. Significant home price appreciation (HPA), such as what occurred over the last two years, under the Countercyclical Adjustment, will require the Enterprises to hold more capital against higher mark-to-market loan-to-value (MTMLTV) loans, likely resulting in increased pricing of these loans. Specifically, USMI urges FHFA to:
- Reconsider and recalibrate the Countercyclical Adjustment. USMI recommends this to ensure the outcome of this adjustment meet FHFA’s policy objectives and considers real-world scenarios where there is significant home price appreciation above or below an inflation adjusted long-term trend.
- Report on whether significant HPA is based on market fundamentals or something else. While FHFA notes in the final rule it does not have discretion around the Countercyclical Adjustment, this should be re-evaluated. Based on market data, including FHFA’s own Housing Price Index, the agency should determine and report on why home prices are escalating. It may be appropriate for FHFA to have discretion to cap capital increases to up to 20 percent when HPA exceeds a certain threshold, rather than allowing for a 40-50 percent increase as would be applicable in today’s market with today’s market HPA.
- Consider recalibrating the Countercyclical Adjustment based on the reassessment. To address the significant impact that the current approach can have on the required capital, and thus the pricing of certain loans, FHFA should consider the different recommendations made in the 2020 NPR responses, including using asymmetric MTMLTV collars, and/or allowing for wider collars (perhaps 7.5 or 10 percent) during increased HPA versus when home prices are declining, or capping the capital increases to up to 20 percent when HPA exceeds a certain threshold.
- Simplify the language and formula for the Countercyclical Adjustment. The Countercyclical Adjustment element of the ERCF is extremely complex and difficult to analyze. It would benefit all stakeholders if FHFA took a more direct and simpler to read and analyze approach to this section.
An executive summary of USMI’s comments can be found here. USMI’s 2020 full comments can be found here and an executive summary can be found here. USMI’s comments on the FHFA’s 2018 proposed Enterprise capital framework can be found here.
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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 to FHFA on Amendments to the Enterprise Regulatory Capital Framework Rule
In November 2021, USMI submitted a comment letter to the Federal Housing Finance Agency (FHFA) on its Notice of Proposed Rulemaking (NPR) on “Amendments to the Enterprise Regulatory Capital Framework (ERCF) Rule – Prescribed Leverage Buffer Amount and Credit Risk Transfer.” In its comments, USMI writes the final rule ensures the Enterprises have sufficient levels of capital to withstand a steep economic downturn but recommends the following to FHFA:
- Adjust credit risk transfer (CRT) minimum risk weight floor to lower than 5 percent. USMI writes that any CRT floor should be designed to consider whether it will have the unintended consequences of discouraging the use of CRT or motivate CRT structures in which the Enterprises retain credit risk simply to justify the arbitrary capital floor. It urges FHFA to consider adjusting the CRT minimum risk weight floor lower than its proposed 5 percent change to a level closer to the statistically determined risk in a retained position to better align the CRT decisioning with the underlying economics and risks posed by the transaction. USMI also recommends FHFA establish and make public the model used to assess the CRT capital benefit, the statistical basis for any floor, and an analysis of the CRT capital treatment impact on the statutory goals of the Enterprises.
- Consider alternative methods to determine the Prescribed Leverage Buffer Amount (PLBA). USMI agrees that the PLBA needs to be adjusted, and that 1.5 percent is excessive, but it recommends FHFA consider alternative methods of determining the amount of the PLBA that more closely relate to risk than the Stability Capital Buffer. USMI writes that it emphatically agrees that the PLBA should not be the usual binding constraint on the Enterprises. However, the NPR does not explain why 50 percent of the Stability Capital Buffer is the appropriate standard. The Stability Capital Buffer itself is a subjectively determined capital requirement and no rationale has been provided for why 5 basis points times market share over 5 percent is chosen, how it is related to the risk, or why the threat to the national housing finance system is not adequately dealt with through the other elements of the ERCF.
- Reduce the single-family risk weight floor to 10 percent or less. USMI recommends the minimum 20 percent risk weight floor for single-family mortgages be reduced to 10 percent or less to more accurately account for the improvements in mortgage lending since the 2008 financial crisis, and to reflect and allow for credit enhancement, while also still requiring the Enterprises to hold an amount of capital against remote credit risk exposure more accurately. Reducing the single-family risk weight floor to 10 percent or less better achieves this outcome.
- Make changes to the Countercyclical Adjustment. While FHFA does not discuss in the NPR, USMI does comment on the Countercyclical Adjustment impact within the 2020 ERCF final rule. Significant home price appreciation (HPA), such as what occurred over the last two years, under the Countercyclical Adjustment, will require the Enterprises to hold more capital against higher mark-to-market loan-to-value (MTMLTV) loans, likely resulting in increased pricing of these loans. Specifically, USMI urges FHFA to:
- Reconsider and recalibrate the Countercyclical Adjustment. USMI recommends this to ensure the outcome of this adjustment meet FHFA’s policy objectives and considers real-world scenarios where there is significant home price appreciation above or below an inflation adjusted long-term trend.
- Report on whether significant HPA is based on market fundamentals or something else. While FHFA notes in the final rule it does not have discretion around the Countercyclical Adjustment, this should be re-evaluated. Based on market data, including FHFA’s own Housing Price Index, the agency should determine and report on why home prices are escalating. It may be appropriate for FHFA to have discretion to cap capital increases to up to 20 percent when HPA exceeds a certain threshold, rather than allowing for a 40-50 percent increase as would be applicable in today’s market with today’s market HPA.
- Consider recalibrating the Countercyclical Adjustment based on the reassessment. To address the significant impact that the current approach can have on the required capital, and thus the pricing of certain loans, FHFA should consider the different recommendations made in the 2020 NPR responses, including using asymmetric MTMLTV collars, and/or allowing for wider collars (perhaps 7.5 or 10 percent) during increased HPA versus when home prices are declining, or capping the capital increases to up to 20 percent when HPA exceeds a certain threshold.
- Simplify the language and formula for the Countercyclical Adjustment. The Countercyclical Adjustment element of the ERCF is extremely complex and difficult to analyze. It would benefit all stakeholders if FHFA took a more direct and simpler to read and analyze approach to this section.
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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: USMI Submits Comment Letter on FHFA’s Request for Input on Enterprise Equitable Housing Finance Plans
WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, submitted a comment letter to the Federal Housing Finance Agency (FHFA) on its Request for Input (RFI) on “Enterprise Equitable Housing Finance Plans” (the Plans), which articulates a framework by which the government-sponsored enterprises (GSEs or Enterprises), Fannie Mae and Freddie Mac, will be required to prepare and implement three-year plans to advance equity in housing finance.
“USMI commends the FHFA for soliciting feedback on the Plans to identify the barriers to sustainable housing opportunities, set goals to address those barriers, and implement policies to address them. The private MI industry welcomes the opportunity to work with FHFA, the GSEs, and other housing finance stakeholders to support the Biden Administration’s goal of a comprehensive approach to advancing equity for all,” said Lindsey Johnson, President of USMI. “As an industry that is dedicated to the U.S. housing finance system and exclusively serves homebuyers with limited access to funds for large down payments, USMI and its member companies are keenly interested in advancing policies that promote access to the conventional mortgage market and support sustainable homeownership.”
In order to address longstanding inequities in the housing finance system, USMI encourages the GSEs to explore and implement geography- (including historically redlines areas, areas of concentrated poverty, and rural areas) and income-based initiatives to expand minority homebuying opportunities in the conventional mortgage market.
On behalf of the private mortgage industry, USMI routinely engages with policymakers to sustainably expand access to homeownership and address barriers that disproportionately impact minority homebuyers. USMI believes that the following actions represent viable policies to promote sustainable homeownership and level the playing field for minority homebuyers:
- Review and Reform Loan-Level Price Adjustments (LLPAs): As 2008-era LLPA fees remain in place and continue to be disproportionately paid in the form of higher interest rates by low- and moderate-income (LMI) and minority borrowers, USMI urges the FHFA to review and reform LLPAs. Changes in the LLPA framework should account for the numerous improvements in the housing finance system since LLPAs were introduced in 2008, promote access to affordable conventional mortgages, and appropriately balance the credit risk being assumed by the GSEs. Given all of the significant improvements in mortgage lending and risk management, USMI supports a holistic review of GSE pricing, including LLPAs, and the current level of cross-subsidization to support LMI homebuyers.
- Review and Revise the Enterprise Regulatory Capital Framework (ERCF): As stated in USMI’s August 31, 2020 comment letter, USMI supports FHFA’s efforts to establish capital standards for the GSEs that appropriately reflect their activities and risk exposures to ensure that capital requirements do not arbitrarily price prospective homebuyers out of the conventional mortgage market. As entities with congressionally-mandated public missions, the GSEs’ capital requirements should promote an appropriate level of cross-subsidization and support LMI borrowers. USMI welcomed FHFA’s September 15 release of a notice of proposed rulemaking (NPR) to amend the ERCF to address two critical elements: (1) the prescribed leverage buffer amount (PLBA); and (2) the treatment of credit risk transfer (CRT) transactions. Ultimately, USMI believes that the proposed changes, coupled with the additional recommendations made by USMI, will more appropriately balance prudent risk management and the level of capital for the GSEs, and their statutory missions.
- Modify the Preferred Stock Purchase Agreements (PSPAs): USMI welcomed FHFA’s September 14 announcement on the suspension of portions of the January 2021 PSPA amendments, most notably the caps on the acquisition of “high-risk” loans. USMI encourages the agency to remove, and not merely suspend, the provisions concerning the so-called “high-risk” loan acquisition caps that disproportionately impact minority access to conventional mortgages.
- Finalize the New Products and Activities Rule: While innovation can be beneficial for expanding homeownership opportunities, USMI highlights the need for a transparent and thorough regulatory mechanism to assess new GSE activities and products to ensure they do not disintermediate other market participants. USMI is encouraged by FHFA’s ongoing review of the GSEs’ pilots, activities, and products to ensure they align with the Enterprises’ explicit public policy objectives in compliance with their charters. USMI believes that new products, activities, and pilots should only be allowed when there is clear and compelling evidence that the GSEs are needed to fill a market void that the private market cannot meet.
- Greater Data and Transparency: To address longstanding inequities in the housing finance system, USMI strongly believes that consistent transparency should be hard-wired into the GSEs’ credit policies and that data around the Enterprises’ performance in key areas, most notably access to credit for minority households, should be publicly available. As noted in USMI’s comment letter, the association firmly believes that additional transparency and data sharing initiatives will enable market participants to enhance access, affordability, and sustainability in the mortgage markets.
“USMI fully supports increased public-private collaboration along with advancing a coordinated housing policy that ensures all borrowers have access to mortgage products in both the conventional and government-backed markets while maintaining safe and sound operations at the GSEs. Policymakers and stakeholders should work together to implement policies that promote access to sustainable housing finance credit to ensure the ability of consumers to purchase and stay in their homes.”
USMI’s full comments on the FHFA’s RFI on the Plans can be found here.
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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: Major Housing Industry Trades and Homeownership Advocates on Tax Treatment of MI Premiums
USMI joined a coalition of housing finance organizations including the Mortgage Bankers Association, National Association of Home Builders, National Association of REALTORS®, and National Housing Conference, in sending a letter to U.S. House of Representatives Committee on Ways and Means Chairman Richard Neil. The undersigned organizations urged the committee to modify current law to make the mortgage insurance premium tax deduction permanent and to eliminate its income phaseout. As a diverse coalition of stakeholders in the housing finance system, they affirmed that the current AGI phaseout represents a burdensome eligibility criterion for American families to claim the mortgage insurance deduction and that millions more homeowners would benefit from a permanent extension that eliminates the AGI phaseout. Click here to read the letter.
