Testimony: Chairman Patrick Sinks Before Congress on Mortgage Insurance and Sustainable Housing

December 6, 2017

Sinks Highlights Importance of Private Mortgage Insurance In Helping Borrowers Qualify for Low Down Payment Mortgages While Protecting Government Against Risk

WASHINGTON — U.S. Mortgage Insurers (USMI) Chairman and Mortgage Guaranty Insurance Corporation (MGIC) CEO Patrick Sinks today testified on behalf of USMI in front of the House Financial Services Committee’s Subcommittee on Housing and Insurance in a hearing entitled “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform, Part IV.”

In his testimony, Sinks highlighted the long and successful role that private mortgage insurance (MI) has played in the housing finance system to help homebuyers responsibly purchase homes with affordable low down payments – all while protecting U.S. taxpayers and the federal government from undue mortgage credit risk. Sinks also discussed the MI industry’s performance through the Great Recession and the key improvements made by the industry that make it more resilient going forward.

“Over the last 60 years, private MI has helped more than 25 million families attain homeownership in a prudent and affordable manner. MI reduces taxpayer risk exposure by transferring a substantial portion of mortgage credit risk to companies backed by private capital. Mortgage insurers covered more than $50 billion in claims since Fannie Mae and Freddie Mac entered conservatorship resulting in substantial savings to taxpayers,” said Sinks.

In addition to the important role the MI industry plays in the housing finance system, Sinks proposed specific principles for housing finance reform and lessons that should be applied to all market participants, as well as recommendations to increase the role of private capital in the housing finance system to further protect taxpayers and the government.

Acknowledging that there should be a diverse set of participants in the future to assume and protect against all mortgage credit risk ahead of an explicit government guaranty, Sinks noted that, “We believe much more can be done to reduce the risk to the federal government and make taxpayer risk exposure even more remote without jeopardizing the ability for creditworthy borrowers to continue to buy a home with mortgage financing. This includes a greater reliance on the mortgage insurance model where private capital stands in front of the government and taxpayers.”

In an August 2017 report, the Urban Institute found that GSE loans with MI consistently have lower loss severities than those without MI. In fact, the report shows that for nearly 20 years, loans with MI have exhibited lower loss severity each origination year. The Urban analysis states that “for 30-year fixed rate, full documentation, fully amortizing mortgages, the loss severity of loans with PMI is 40 percent lower than [loans] without.”

USMI President and Executive Director Lindsey Johnson echoed Sinks’ Congressional testimony today: “Private MI has been an invaluable piece of the housing finance system for a long time, decades longer than any other low down payment model being tested. Fortunately, our industry is strong and ready to shoulder an even greater responsibility in the system moving forward. Underscoring the strength of MI, the industry paid more than $50 billion in claims since the financial crisis and has implemented new higher robust capital standards. We appreciate Congress’ work to address long overdue reforms to the housing finance system and USMI members look forward to continuing and enhancing the credit risk protection MI provides to shield taxpayers from mortgage credit risk and to promote homeownership across the country.”


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.