“As a reminder, only 25% of a VA (mortgage) loan is federally guaranteed which reportedly limits some lender participation. To that point, at the MBA conference last week HUD Secretary Castro stated that the 25% limitation ‘leaves a lot of small lenders awfully exposed and reluctant to offer veterans credit under this initiative.’”, November 2014 Mortgage Industry Newsletter

“I believe it. But think about this for a minute. Private mortgage lenders/banks are worried (“awfully exposed” according to the HUD Secretary) that a 25% guarantee from the VA (the first 25% of loss is paid by the VA) is not enough to fully protect them against loan losses. And smaller lenders might not be able to absorb these losses, so they won’t lend!!! Yet everyone in the mortgage and real estate industry, consumer housing advocates, the VA, and our politicians, seems fine with veterans borrowing nearly 100% of the purchase price to buy a home!!! Clearly, any homebuyer could either succeed and build home equity or fail and lose their home to foreclosure, hurting their credit and finances. And clearly (in most cases), it’s not the mortgage lender’s or the borrower’s fault if they do fail. It’s our national housing/mortgage policies that are responsible. Maybe those policies are good, except during a housing bubble/bust, and maybe those policies could be better? Like most, I am still not sure what the right answer is, but I do know (from hard experience acquired during the recent housing downturn) that low-to-no down payment mortgages (especially government ones where taxpayers are also directly exposed) are a big risk to everyone, if they were originated during an unsustainable housing price bubble.”, Mike Perry, former Chairman and CEO, IndyMac Bank

 

November 2014 Mortgage Industry Newsletter Excerpt (that includes the above and more):

 

“And the mortgage insurance business has been in the news. Isaac writes, “On October 28, Bloomberg ran an article focusing on HUD’s push to evaluate the merits of private mortgage insurers (PMIs) providing supplemental insurance on VA loans. As a reminder, only 25% of a VA loan is federally guaranteed which reportedly limits some lender participation. To that point, at the MBA conference last week HUD Secretary Castro stated that the 25% limitation ‘leaves a lot of small lenders awfully exposed and reluctant to offer veterans credit under this initiative.’ While it is far too early to assess the potential impact of supplementary coverage on VA loans, this policy conversation reinforces our longer-term belief that the forthcoming finalization of the PMIERs will soften the ground for the PMI industry’s efforts to increase and diversify the risks it insures.” Isaac notes it is too early to estimate the potential impact on the PMI industry but that, “The conversation surrounding supplementary insurance on VA loans reinforces our longer-term belief that governmental entities will become increasingly willing to allow PMIs to take additional and varying forms of risk given their improved capital position in the wake of the Private Mortgage Insurance Eligibility Requirements (PMIERs). We believe that the PMIERs will place the PMIs on sound financial footing which should soften the ground for industry efforts to increase and diversify the forms of risk they insure. These efforts could take the form of supplementary insurance on VA loans or deeper up-front risk sharing for PMIs (see MBA proposal). We continue to expect the FHFA to finalize the PMIERs by the end of 2015 or early Q1 2015 which should remove a meaningful policy overhang for the group and allow for the PMI conversation in D.C. to evolve.”

Posted on November 20, 2014, in Postings. Bookmark the permalink. Leave a comment.

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