Statement: HUD’s 2019 Annual Report to Congress
WASHINGTON— Lindsey Johnson, President of the U.S. Mortgage Insurers (USMI), released the following statement today on the U.S. Department of Housing and Urban Development (HUD) release of its 2019 Annual Report to Congress on the financial status of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMIF):
“USMI appreciates HUD’s thorough analysis of the MMIF’s economic condition and the release of valuable data on FHA borrower trends and mortgage performance. According to the report, the MMIF’s capital ratio stands at 4.84 percent, up from 2.76 percent last year, continuing the much-needed upward trend above the thin statutory requirement of only 2 percent. We applaud the FHA’s continued efforts to stabilize and further strengthen the fiscal health of the fund so that the FHA can continue its important role alongside the rest of us in serving the low-down payment market. We are encouraged by the longer-term focus of FHA as stated in their Annual Report, recognizing that ‘the MMI capital ratio is a result, not the target.’ Given the ‘extreme risk layering’ that FHA cites is on the rise, the cyclicality of the mortgage market, and the volatility of the Home Equity Conversion Mortgage (HECM) program, USMI agrees with the Administration’s actions to ensure that FHA can withstand another housing downturn and serve its important countercyclical role.
“In the Annual Report, Secretary Carson highlights that ‘[i]n our Housing Finance Reform Plan released in September of this year, we propose a number of solutions that would reduce risks to the MMI Fund, protect taxpayers from future bailouts, and ensure the FHA maintains its focus on providing access to mortgage financing to low- and moderate-income families that cannot be fulfilled through traditional underwriting.’The FHA is a very important part of the housing finance system, and USMI has long called for a more complementary, not competitive, role between FHA and the conventional market. Thankfully, today there is a vibrant low-down payment conventional market backed by private capital that continues to prudently facilitate the low-down payment credit needs of millions of Americans, giving consumers more options and shielding taxpayers from undue risk. In the past year alone, the private mortgage insurance (MI) industry helped more than 1.1 million people purchase or refinance their home—nearly 60 percent of purchasers were first time homebuyers and more than 40 percent of borrowers with private MI had annual incomes of $75,000 or less.
“Private MI continues to be well positioned to play a leading role in enabling borrowers to access affordable and sustainable low-down payment mortgage credit and serving as the first layer of protection against mortgage defaults to protect U.S. taxpayers and the federal government. In this sense, private MIs hold nearly double the capital assets that they held before the financial crisis, and just last week, USMI released details on the innovative growth of private MI credit risk transfer (MI CRT). Over the last four years, through new MI CRT structures, the industry transferred nearly $34 billion in risk on nearly $1.3 trillion of insurance-in-force, enhancing MI resiliency and the risk protection provided to the conventional mortgage market.
“Going forward, USMI and our member companies look forward to working with FHA and the Administration to promote complementary roles for the conventional market and FHA in the low-down payment lending space in order to best serve borrowers and protect taxpayers.”
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.