PERSON OF THE WEEK: As the mortgage banking industry continues to reinvent itself, the state of mortgage insurance (MI) remains in a state of ebb and flow. This week, MortgageOrb talks with Tony Bruschi, vice president of new business development and account management at Philadelphia-based Radian Guaranty about the challenges facing the mortgage insurance sector.
Q: How would you categorize the state of the MI market today?
Bruschi: With recent changes at the Federal Housing Administration (FHA), including its second price increase in six months, many lenders are taking a renewed interest in private MI, realizing that for many low-down-payment borrowers, conventional financing with private MI is a much more cost-effective alternative to the FHA. And while lower home values are negative for current homeowners, low interest rates and home prices make this a great market for first-time home buyers, who typically require MI on their loan.
Q: What impact will the new focus on the Qualified Residential Mortgage (QRM) have on MI?
Bruschi: Given the broad-based feedback on the unintended negative implications of the rules relating to QRM as it's currently written, we believe it's highly unlikely the recommendation will be approved without any changes. It's also important to remember that government-sponsored enterprise (GSE) loans are considered QRM qualified loans while they are in conservatorship, and as such, MI loans would qualify.
At the same time, there are new federal regulations stipulating that loan officers can no longer be compensated based on loan type. As a result, increasing loan volume becomes much more important for driving dollars to an originator's bottom line.
Q: If and when the GSEs are wound down, how will that impact MI?
Bruschi: If the GSEs are wound down, we would need to evaluate all options for best leveraging our capital and credit and risk expertise to meet the needs of and deliver our product to the market, as we believe it's important for there to be a private-market alternative to the FHA. Private mortgage insurers are well positioned to play a critical role in the future of the housing finance market by safely and soundly enabling first-time and lower-income families to purchase homes.
Q: Some economists are warning of a double-dip recession in housing. How would that impact MI?
Bruschi: There are few industries that wouldn't be negatively impacted by a double-dip recession. It would be challenging for the MI industry, for sure, considering the billions of dollars in claims our industry has paid to date.
