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Mortgage giants Fannie Mae and Freddie Mac may not agree on how best to provide equitable access to home ownership, but they’re on opposite sides of the aisle. Two U.S. lawmakers in the United States took up the cause of private mortgage insurance companies. Mortgage giants rely on it.
Missouri Rep. Blaine Lutkemeyer and Emmanuel Cleaver join a chorus of financial industry associations that regulators say contributed to the 2008 subprime mortgage crash. He called on the Securities and Exchange Commission (SEC) to act prudently to eradicate conflicts. economic crisis.
SEC in January proposed a rule This is intended to prevent the many parties involved in pooling assets such as mortgages into securities from taking positions with investors who buy those securities. The rule would prohibit “conflicting trades,” such as shorting the same security or buying a credit default swap that pays a profit if the security declines in value.
The problem with the proposed rule, according to lending industry groups, is that private mortgage insurers have transferred nearly $68 billion of risk since 2015, freeing up capital that can be used to insure Fanny and additional home loans backed by Fanny. It could interfere with the systems that have been used to do so. Freddy.
Fanny and Freddie typically require borrowers with downpayments of less than 20% to have private mortgage insurance. If a borrower defaults, the insurance helps mortgage giants keep paying investors who buy mortgage-backed securities (MBS). Private mortgage insurance companies absorb some of the losses before Fanny and Freddy, the taxpayers, have to intervene.
However, the surge in claims faced by private mortgage insurers in the aftermath of the 2008 financial crisis has made it difficult for some insurers to meet the capital requirements needed to continue setting up new businesses. became. Since then, private mortgage insurers have developed a more secure system of “reinsuring” themselves by issuing Mortgage Insurance Linked Notes (MILNs).
Requests to Regulatory Authorities
in them Letter of May 23 Speaking to SEC Chairman Gary Gensler, Lütkemeyer and Cleaver said the SEC would not apply to MILN, and that the bill would not be an “inconsistent transaction.” asked to add.
“In a MILN transaction, the private mortgage insurance company remains responsible for paying the mortgage insurance policies in the pool, retains the risk of the mortgage insurance policies not covered by the reinsurance agreement, and retains the risk of the mortgage insurance policies that are not covered by the reinsurance agreement and You are only entitled to recover actual losses incurred. Mortgage insurance policy,” the House members wrote. “The result is a alignment of interests between the parties to the MILN transaction as both private mortgage insurers and investors are encouraged to help borrowers become and continue to be successful homeowners.”
All six domestic providers of private mortgage insurance (Arch, Enact, Essent, MGIC, NationalMI and Radian) submitted similar content. collective petition filed with the SEC as part of Rule making procedure. So did industry associations in the lending industry. Mortgage Bankers Association and Housing Policy Council.
on thursday blog postexecutives of the industry group United States Home Mortgage Insurance Company (USMI) emphasized the role the companies they represent play in mortgage finance.
The USMI estimates that private mortgage insurers will help more than 1 million homes buy or refinance in 2022, and the industry helped about $402 billion in mortgage originations. By the end of the year, the private mortgage insurance industry had insured approximately 5.7 million mortgages totaling $1.512 trillion.
“Traditional loans [mortgage insurance] FHA-backed mortgages and mortgages are the two main ways American families acquire home ownership for less than 20 percent down payment,” said USMI President Adolfo Marzol. “Policy makers really need to consider that both are private.” [mortgage insurance] and the FHA play an important role in a well-functioning housing finance system. ”
unlikely to be an influential ally in Congress
Although they are allied in their support for private mortgage insurers, Lütkemeyer is a Republican and Cleaver is a Democrat, and both have differing views on Fanny and Freddie’s proper roles in mortgage finance. different.
Last week, Lütkemeyer sandra thompson grillFanny and Freddy’s Federal Regulatory Chief Speaks Out on Controversial Fee Changes previously claimed This would force “high credit homebuyers to subsidize low credit mortgage costs.”
Cleaver is Kansas City’s first black mayor and has been on Congress since 2004. wrote a thank you letter to Thompson For the Federal Housing Finance Agency’s decision to eliminate upfront fees for many first-time homebuyers who do not exceed the income ceiling.
One thing Lütkemeyer and Cleaver have in common is seniority in Congress, which has helped them win seats on influential House committees. A former bank inspector who was first elected to Congress in 2008. Performed by Lütkemeyer He serves on the House Financial Services Committee and is a senior member of the House Small Business Committee.
Cleaver is also serving his 10th term in Congress. serve the He is a senior member of the House Financial Services Committee’s Subcommittee on Housing and Insurance.
These committee mandates make listening to Lütkemeyer and Cleaver an important priority for the lending industry association. Trade associations of financiers have been major supporters of both candidates’ past campaigns, according to OpenSecret, a nonprofit that tracks campaign finance and lobbying.
During the 2022 campaign cycle, Mr. Lütkemeyer receives the award $69,210 in campaign funds from groups that promote mortgage bankers and brokers’ interests, the second-largest amount among congressmen. Cleaver, ranked No. 4, has received $58,000 in funding from a mortgage industry group to help run a successful 2022 re-election campaign.
The USMI’s Political Action Committee (PAC) is not a major player in campaign finance, but has contributed to the campaigns of both candidates.in the 2020 Election CyclePAC donated $1,000 to Cleaver’s election, $1,500 to Lütkemeyer’s reelection bid, and another $1,000. 2022 Lütkemeyer.
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