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4 quick reactions to FHFA mortgage insurer liquidity plan

Regulators want proof insurers can pay claims

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The Federal Housing Finance Agency wants private insurers to show proof they can cover losses on defaulted mortgages, even in adverse economic times.

Just this afternoon the FHFA opened up a commentary period on the Private Mortgage Insurer Eligibility Requirements it intends to put in place and here are four quick reactions from some of the top players in the space.

1. Fannie Mae:

Andrew Bon Salle, executive vice president, single-family underwriting, pricing, and capital markets, sent this over on Private Mortgage Insurer Eligibility Requirements:

“Updating eligibility requirements for mortgage insurers is an important part of reducing risk to taxpayers and building a safer, stronger housing finance system for the future. The draft requirements seek to ensure that mortgage insurance companies have sufficient liquidity to pay all claims under a potential future stress scenario, are appropriately capitalized, have strong risk management functions, and can meet new business standards. The draft requirements, along with an overview document prepared by FHFA, lay out a framework and timeline for the existing approved mortgage insurers to come into compliance with the new standards while they continue to insure new business eligible for delivery to Fannie Mae. Mortgage insurance is a key source of private capital in the mortgage finance market, and we look forward to working with FHFA and Freddie Mac to finalize these requirements after consideration of public and industry feedback.”

2. Freddie Mac:

Gina Healy, vice president of mortgage insurance and credit risk, had this to say:

"The draft eligibility standards issued for public input today will strengthen counterparty requirements for private mortgage insurance industry that will continue to play a key role as a source of private capital in mortgage markets. Private mortgage insurance enables Freddie Mac's mission to continuously make affordable mortgages available to America's borrowers. We encourage stakeholders to use the 60-day input period to study and provide feedback on the eligibility standards developed by Freddie Mac and Fannie Mae under the direction of the Federal Housing Finance Agency. Freddie Mac is committed to working with the housing industry and other stakeholders to improve America's mortgage finance system to provide borrowers, lenders and investors with greater opportunity, stability and certainty."

3. Radian:

“Radian fully supports the need for strong counterparties to Fannie Mae and Freddie Mac, and the need for well-defined standards against which private mortgage insurers should be measured,” said Radian Guaranty President Teresa Bryce Bazemore. “We believe appropriately structured PMIERs will better position our industry to continue serving its critical role in the housing finance market, including providing worthy borrowers with access to homeownership.”

The company’s comments will also outline how the proposed PMIERs are inconsistent with the FHFA’s stated goal of expanding access to mortgage credit and reducing taxpayer risk by increasing the role of private capital in the mortgage market.

Bazemore added, “We look forward to continuing our dialogue with the FHFA and the GSEs as they gather input on the PMIERs. We are proud of our strong working relationship that was also in place as Radian met all of its obligations during the greatest economic stress in our company’s history, paid more than $5 billion in claims, and strengthened our capital levels to support continued low downpayment lending.” 

4. National MI:

“National MI believes that the proposed eligibility requirements for private mortgage insurers will go a long way to help restore confidence in an industry affected by the recent housing crisis,” CEO Bradley Shuster said. “A strong and financially sustainable private mortgage insurance industry is a key component of a healthy residential mortgage market.”

The FHFA’s 2013 Conservatorship Scorecard called for the government-sponsored enterprises (GSEs) to “develop counterparty risk management standards for mortgage insurers that include uniform master policies and eligibility requirements." As expected, the proposed requirements released today seek to establish more stringent eligibility standards for GSE-approved mortgage insurers and emphasize claims-paying ability through the implementation of robust financial requirements. “National MI believes it will be well-positioned to meet the new eligibility requirements when they become effective and to continue serving the needs of mortgage lenders,” Shuster said. 

National MI will further evaluate the proposed eligibility requirements and consider submitting comments, as appropriate. “We welcome the level playing field created by these new eligibility requirements, and believe that strong, transparent, financial strength requirements will ensure the industry is well-capitalized to take on an increasing role in providing credit enhancement to the housing finance industry as the government seeks to reduce its footprint,” Shuster said.

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