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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)
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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)
