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.