private mortgage insurance today presented by: susie avery – united guaranty mike kull –...
TRANSCRIPT
Private Mortgage Insurance Today
Presented by:
Susie Avery – United Guaranty
Mike Kull – Mortgage Guaranty Insurance Corporation
Private Mortgage Insurance – Industry Overview
Current market conditionsHow is MI fitting in and helping out
(purchase through servicing)Private MI vs FHA as a purchase optionSolutions available for buyersHow MI is assisting homeowners in defaultProposed regulation and the future of private
mortgage insurance
U.S. EconomyRecovery continues to be weak, with fear of
another dipUnemployment rate continues to be high,
along with under-employed and those who have given up on looking for employment
Private sector job creation is sluggishHome sales are down from 2010Home values continue to dropBorrowers continue to struggle with making
payments
Indiana StatisticsUnemployment rate at 8.7% in August vs 9.1% for
the entire United States (US Bureau of Labor Statistics 9/16/11)
Employment down 28,300 from 7/10 – 7/11 (US Bureau of Labor Statistics 9/2/11)
Home sales in Indiana this year, through July, are down 8.5%, with pending sales down 10.5% and new listings down 11.5% (Indiana Association of REALTORS)
2nd quarter home sale prices in Indiana fell 1.33% from a year earlier (Federal Home Finance Agency 8/24/11)
Indiana Statistics (cont’d)Past due mortgage payments as of the 2nd
quarter include:9.51% of all loans (FHA 13.3%)4.56% of all loans are 30 days past due (FHA
6.3%)3.35% of all loans 90 days or over (FHA 4.69%)Foreclosure inventory stood at 4.86% of homes
(Mortgage Bankers Association 8/22/11)
Housing AffordabilityAt near all-time highs (National Association
of REALTORS) with rates at historic lows (Freddie MAC)
1.2m – 1.4m new households projected to be formed annually between 2010 – 2020
Minorities will account for 70% of this growth
Persons born between 1979 and 1994 will account for the majority of growth
Private MI Market AssistanceConstantly reviewing housing and delinquency
data and adjusting guideline and pricing modelsWorking with and educating lenders nationwide
to improve home purchase and refinance options and consumer education
Adding to staffing to help lenders and consumers nationwide with mortgage delinquency challenges
Advocating at both the national and state levels of government for informed legislation and regulation of the mortgage industry
Private MI Market Assistance (cont’d)
50% of every premium $ set aside for claimsHistoric support of housing market with
claims paid:$6B in the 1980s$8B in the 1990s$22B paid since 2007 with expected total of
$30B!Private mortgage insurance is private capital,
not taxpayer $$$!
FHA 2010 FHA statistics:
Accounted for 40% of all originationsInsured 1.1M homeowners40% of FHA loans were 95% loan-to-value or
greater70% of FHA borrowers invested their own
funds as down paymentThe average FHA purchase price was $167,782
FHA Insurance FundTarget of 2%Fell to below .5% in 1st quarter of 2011
Private MI Advantages vs FHAPrivate MI companies want market share
increase while FHA wants to pull backMortgage insurance cost is lessFlexibility in premium options and structureLower or comparable monthly paymentIncrease in equity, not the loan amountOpportunity for MI cancellation earlier (as
little as 2 years vs 5 for FHA)
Private MI vs FHA (cont’d)FHA offers few options for payment of
premiumWith FHA, credit scores do not impact
pricing, only loan-to-valuePrivate MI has many different options as ‘one
size does not fit all’Consumers should ask lenders questions as
to options available and best fit for them
Private MI Assistance in Default Situations – Private MI Loans
Not interested in owning properties!Works primarily with lenders as they are the
insured partySignificantly increased loss mitigation staff in
recent yearsPre-purchase education for prospective
homeowners, including on-line, for default prevention
MICA web site for education tools at www.privatemi.com
Proposed Regulations Impacting Private Mortgage Insurance
Qualified Residential Mortgage (QRM)
Qualified Mortgage (QM)
Qualified Residential MortgagePart of Dodd-Frank Bill8 months to prepare and 360 pages longMinimum 5% retention risk by lendersNarrow definition that includes; 20% DP on
purchases, 25% equity in refi. and 30% cash-out refi., 28/36% ratios, 0 x 60 in last 24 mos., fully documented, and, no ARMs or interest –only
As written, significant impact on mortgage availability
Fannie Mae, Freddie Mac are exempt until no longer supported by gov’t., along with FHA and VA
Qualified MortgagePart of Dodd-Frank BillRequires lenders to verify and document
income, Tasks the CFPB to issue regulations covering
the originator confirming the borrower’s ability to repay, that they did not steer a consumer to the loan they chose outside of a QM, and, prohibits originator from engaging in abusive or unfair practices that promote disparities among consumers of equal credit worthiness
Private MI Going Forward
Larger share of the market with FHA wanting to reduce their share
Over $250B in capacity to serve the needs of the US housing market
Evolving products and pricing to service new market(s)