Transcript Private Mortgage Insurance Today

Private Mortgage Insurance Today
Presented by:
Susie Avery – United Guaranty
Mike Kull – Mortgage Guaranty Insurance Corporation
Private Mortgage Insurance –
Industry Overview
 Current market conditions
 How is MI fitting in and helping out (purchase
through servicing)
 Private MI vs FHA as a purchase option
 Solutions available for buyers
 How MI is assisting homeowners in default
 Proposed regulation and the future of private
mortgage insurance
U.S. Economy
 Recovery continues to be weak, with fear of another
dip
 Unemployment rate continues to be high, along with
under-employed and those who have given up on
looking for employment
 Private sector job creation is sluggish
 Home sales are down from 2010
 Home values continue to drop
 Borrowers continue to struggle with making payments
Indiana Statistics
 Unemployment 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 Affordability
 At 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 Assistance
 Constantly reviewing housing and delinquency data
and adjusting guideline and pricing models
 Working 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 claims
 Historic 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 originations
 Insured 1.1M homeowners
 40% of FHA loans were 95% loan-to-value or greater
 70% of FHA borrowers invested their own funds as down
payment
 The average FHA purchase price was $167,782
 FHA Insurance Fund
 Target of 2%
 Fell to below .5% in 1st quarter of 2011
Private MI Advantages vs FHA
 Private MI companies want market share increase
while FHA wants to pull back
 Mortgage insurance cost is less
 Flexibility in premium options and structure
 Lower or comparable monthly payment
 Increase in equity, not the loan amount
 Opportunity 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 premium
 With FHA, credit scores do not impact pricing, only
loan-to-value
 Private 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
party
 Significantly increased loss mitigation staff in recent
years
 Pre-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 Mortgage
 Part of Dodd-Frank Bill
 8 months to prepare and 360 pages long
 Minimum 5% retention risk by lenders
 Narrow 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 Mortgage
 Part of Dodd-Frank Bill
 Requires 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)
Questions?