Testifying before Congress, Mortgage Insurance Companies of America (MICA) pledged to play a critical role in the future of housing finance by continuing to enable first-time and lower income families to purchase homes safely and soundly. Testifying on behalf of MICA was Patrick Sinks, president and chief operating officer of Mortgage Guaranty Insurance Corporation in Milwaukee, Wisc.
Sinks discussed the role of private mortgage insurers during the financial crisis, stating that the industry has "weathered the storm," and is now able to "meet the expanded needs of first-time homebuyers seeking low downpayments on conventional mortgages." Sinks explained that, even in the wake of the nation's mortgage crisis, private mortgage companies are successfully raising billions of dollars in private capital from investors to underwrite new loans, shifting risk away from the government and back on to private investors.
Sinks offered testimony during the House Committee on Financial Services Subcommittee hearing on the "Future of Housing Finance: The Role of Private Mortgage Insurance." Moving forward, he believes that private mortgage insurance is capable of making prudently underwritten mortgages accessible for low downpayment and first-time homebuyers.
"The primary barrier for most borrowers to buying a home is coming up with a 20 percent downpayment," said Sinks. "That barrier can be overcome in a safe and sound manner by encouraging the use of private mortgage insurance. Mortgage insurers act as a second set of eyes by reviewing the credit and collateral risks related to individual loans. This role protects both borrowers and investors by ensuring that the home is affordable at the time of purchase and throughout the years of homeownership."
Private mortgage insurers have met and fulfilled their financial obligation from the start of the crisis until today, and have done so without any government assistance. Sinks testified that mortgage insurers are prepared to bring private capital back into the market, meeting the increased needs of first- time homebuyers seeking low downpayment conventional mortgages. On several occasions, Treasury Secretary Geithner has publicly called for increased private capital.
"Today, the [mortgage insurance] industry is well positioned to help expand affordable housing opportunities in a responsible manner. Under strong capital rules from state insurance regulators, the MI industry has sufficient capital to increase their total insurance exposure by $261 billion a year for the next three calendar years. If this additional volume is realized it would mean that approximately 1.3 million additional mortgages would be insured in each of the years," Sinks testified.
Private mortgage insurers currently have billions of dollars in private capital on hand and stand ready today to serve homeowners without putting the government or taxpayer money at risk. Moreover, private mortgage insurance companies are the only major source of private capital currently in the marketplace.
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