The mortgage insurance industry hopes that banking regulators recognize the value of their product when finalizing their ‘qualified residential mortgage’ (QRM) test — but so far their pleas have fallen on deaf years.
In Congressional testimony late this week Genworth senior vice president Kevin Schneider brought his case to Capitol Hill, arguing that if MI coverage is not recognized in the QRM, the Federal Housing Administration (FHA) will be overwhelmed with new business with taxpayers bearing “100% of the risk for all low-downpayment loans.”
According to figures compiled by National Mortgage News and the Quarterly Data Report, the private MI industry provides loss coverage on almost $800 billion of loans, compared to about $1 trillion for FHA and Department of Veterans Affairs.
Under the current regulatory proposal, no credence is given to MI when defining a QRM. It’s as though it doesn’t exist when backstopping the credit quality of downpayments of less than 20%.
Genworth provided figures to the House Financial Services Committee showing that loans with MI policies on them perform better than those without. “In fact, with all other characteristics being equal, insured mortgages” become delinquent 32% less frequently “than comparable uninsured loans,” Schneider told the committee.
The Genworth executive noted that in 2009, half of all home buyers made a downpayment of less than 20%. He estimates that a 20% downpayment requirement will keep at least 16 million home buyers out of the market or force them to pay “substantially” higher rates.