Newsletter: December 2022
December 2, 2022
As we wind down towards the end of the year, U.S. Mortgage Insurers (USMI) has been working hard to ensure first-time homebuyers continue to have access to affordable housing. This continues our industry’s 65-year history of helping families attain the American dream of homeownership and providing credit risk protection on nearly $1.5 trillion of mortgages. Over the last couple of months, USMI has released multiple statements including on the Federal Housing Finance Agency’s (FHFA) Announcements Regarding GSE Pricing, Credit Scores and Appraisal Data and the Federal Housing Administration’s (FHA) Actuarial Report. We also recap our Hispanic Heritage Month activities and more below.
USMI recently led a coalition of housing trade associations and affordable housing advocates, including the American Bankers Association (ABA), Mortgage Bankers Association (MBA), National Association of Home Builders (NAHB), National Association of REALTORS® (NAR), and National Housing Conference (NHC) in sending letters to the House Ways and Means Committee and Senate Finance Committee leadership. Fourteen organizations urged the committees to support existing homeowners and prospective homebuyers to make the mortgage insurance premium tax deduction permanent and increase its income phaseout. The tax deduction for mortgage insurance premiums has long enjoyed bipartisan support and, as Congress considers any year-end tax package, the signing organizations firmly believe this deduction is both good tax policy and housing policy.
On November 15, USMI issued a statement on FHA’s release of its Fiscal Year 2022 Annual Report to Congress on the financial status of the Mutual Mortgage Insurance Fund (MMIF). USMI supports the progress that has been made to restore the fiscal health of the MMIF, which shows a capital ratio of 11.11% – an improvement from 8.03% for fiscal year 2021. Due to current economic and housing uncertainty, it is imperative that the FHA maintain a prudent approach to pricing and risk management. FHA should protect the short- and long-term financial health of the MMIF to best position itself to support the market through the economic cycle. USMI and its member companies are committed to continued engagement with the FHA, Biden Administration, and Congress to advance policies that facilitate access to affordable and sustainable low down payment mortgages while also protecting taxpayers.
On October 25, USMI released a statement on the FHFA’s announcements to: (1) change the Government-Sponsored Enterprises’ (GSE) guarantee fee (g-fee) pricing by eliminating upfront fees for certain borrowers and affordable mortgage products; (2) validate and approve both the FICO 10T and VantageScore 4.0 credit score models for use by the GSEs; and (3) publish its new Uniform Appraisal Dataset (UAD) Aggregate Statistics Data File.
USMI commends FHFA for its ongoing review of the GSEs’ pricing frameworks, particularly the appropriateness of upfront fees on loans with private mortgage insurance risk protection. We also appreciate Director Sandra Thompson’s work to modernize credit scoring in a manner that balances access to credit and the safety and soundness of the housing finance system, and support FHFA’s public release of appraisal data to begin to democratize this vitally important information.
To celebrate Hispanic Heritage Month, USMI published a blog on our conversations with prominent leaders in the housing finance and mortgage industries to discuss their work and perspectives on the goal of increasing Hispanic homeownership in America. We spoke with Sen. Bob Menendez (D-NJ), former Deputy Secretary of HUD Brian Montgomery, and 2022 National Association of Hispanic Real Estate Professionals’ (NAHREP®) President Luis Padilla.
In reflecting on Hispanic Heritage Month intersecting with homeownership, Sen. Menendez said, “[i]n the rising number of new Latino homeowners, we can see the progress that has been made in building generational wealth in our community. At the same time, the Hispanic homeownership rate, while growing, is still far lower than the white homeownership rate.” Montgomery advised that the greatest aid to Hispanic Americans is “reducing the barriers to homeownership at this time by increasing supply, taking pressure off this market that continues to make it difficult for many young families to become first-time homebuyers because of cost and a lack of supply among other challenges.” Padilla noted that “loan-level price adjusters (LLPAs) create undue burdens on communities of color,” and said, “[f]or loans already covered by private mortgage insurance, LLPAs should be eliminated.”
USMI was recently quoted in two articles from Inside Mortgage Finance’s Monica Hogan. The first article, titled, “Private MI Firms Plan for Ongoing Economic Volatility,” quoted Enact, National Mortgage Insurance, Essent and Radian’s CEOs remarks during their third quarter earnings calls as the companies monitor the potential volatility in the housing market and take steps to manage risk ahead of an uptick in unemployment or other recessionary outcomes. USMI was also quoted saying, “[t]he industry is well-positioned to play its essential role of credit risk protection should there be a recession because of key reforms implemented over the last 10 years, including an enhanced regulatory framework, strong capital requirements and widespread utilization of credit-risk transfer strategies.”
In her second article, which focused on the ongoing pricing reviews for FHA and the GSEs, Hogan quoted USMI twice stating, “[t]he private mortgage insurance industry and FHA play complementary roles in the low-downpayment segment of the mortgage market, and it is imperative that FHA maintain a strong capital position,” adding that it is “critical that the FHA maintain a prudent approach to pricing and risk management that will protect the short- and long-term financial health of its Mutual Mortgage Insurance Fund.”
The Urban Institute recently published a report titled, “Reducing the Black Homeownership Gap Through Underwriting Innovations.” The report “shows that including positive alternative data in underwriting is a step toward closing the Black-white homeownership and wealth gaps.” Notably, Enact MI’s nontraditional credit pilot program was mentioned in the report. The pilot program builds on existing GSE nontraditional credit guidelines to sustainably enable access to mortgage financing for borrowers who have thin credit files or are otherwise not captured by traditional credit scoring.