Fannie Mae’s new mortgage insurance pilot announced last week is troubling to mortgage insurers who continue to question the GSEs’ blurring of lines between primary and secondary markets. Fannie’s Enterprise-Paid Mortgage Insurance program is billed as just a way to give lenders another option for obtaining mortgage insurance for high loan-to-value loans. Under the pilot, Fannie will arrange primary MI coverage for existing private MIs or a panel of affiliated reinsurers. Fannie said the new option allows the GSE to streamline the operational requirements of participating lenders, increase the certainty of coverage and better manage Fannie’s counterparty risk. Fannie officials explained that they expect traditional mortgage insurance to be the primary cover for loans with LTVs over 80 percent.

Analysts speculate that the new capital requirements expected for private mortgage insurers will be higher than current standards. Reinsurer capital requirements under Fannie Mae’s new Enterprise-Paid Mortgage Insurance pilot may be an indicator of upcoming private mortgage insurance eligibility requirements (PMIERs), according to analysts with Keefe, Bruyette & Woods. KBW said with PMIERs expected to be finalized around the time the EPMI starts, it’s possible that reinsuer capital standards could be similar to PMIERs 2.0. “If the capital requirements for reinsurers end up being the same as PMIERs 2.0, we estimate the capital requirements for the MIs would be roughly 10 percent higher than under PMIIERs 1.0,” said KBW.

California remained the biggest market in the U.S. for primary mortgage insurance during the second quarter, but other states had higher proportions of insured loans, according to an Inside Mortgage Trends analysis of agency loan-level data. In Florida, Virginia and Georgia, more than 60 percent of agency loans carried some form of primary mortgage insurance ... [Includes one data chart]

The seasonal surge in housing sales produced a strong increase in primary mortgage insurance activity during the second quarter, especially for private MIs, according to an Inside Mortgage Finance ranking and analysis. [Includes three data charts.]

New FHA Commissioner Brian Montgomery this week revealed that he’s in a “fix it” mode to preserve the government mortgage insurer for “generations to come.” In a wide-ranging interview with Inside FHA/VA Lending and other members of the trade press, Montgomery made it clear his goal is to make sure the Mutual Mortgage Insurance Fund – which backstops agency loans – remains in the black and above its minimum capital reserve ratio of 2.0 percent. During the interview, however, he hardly mentioned the MMIF by name but set parameters on what he would be willing to change at FHA. All his positions seem aimed at preserving and growing the fund’s cash position. First and foremost, there likely will be no cut in FHA premiums this year. Also, don’t count on any risk-sharing arrangements with private mortgage insurance firms. And last, the thought of ending the “life of loan” coverage that ...

Fair housing advocates are outraged over the Department of Justice’s recent repeal of mortgage shopping guides and other regulatory guidance, but an industry attorney says it is no big deal. Bent on eliminating agency regulation by guidance, the DOJ last week rescinded 24 guidance documents issued by a variety of government agencies. Among those revoked were guidance that provided information regarding predatory lending, consumer mortgage shopping and discrimination based on national origin. The DOJ action stems from a November 2017 memorandum issued by Attorney General Jeff Sessions rescinding guidance that either were issued improperly or were inconsistent with current law. It also complies with a presidential directive to all federal agencies in February to implement and enforce regulatory reform, which called for a review of all existing regulations, policies and guidance for possible repeal ...

The Department of Housing and Urban Development has removed the FHA inspector roster to streamline inspection requirements for FHA single-family mortgage insurance. Removal of the list of approved inspectors recognizes the quality of inspections performed by certified inspectors and other qualified individuals, said HUD. HUD originally established the roster to standardize the inspection process for properties with FHA-insured mortgages. Prior to the roster, cities and states developed their own building codes, which had little uniformity or consistency with each other. Currently, the department abides by the International Residential Code (IRC), which is in use in 49 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands. The International Code Council, which developed the IRC, also certifies combination inspectors (CIs) and residential ...

The U.S. Department of Agriculture’s Rural Housing Service is seeking comment on a proposed rule that would enable more lenders to make combination construction-to-permanent single-family loans to borrowers. The new combination construction-to-permanent loan, or “single close loan,” allows approved lenders to close a new construction loan and receive a loan-note guarantee before construction begins. The loan expands low- and moderate-income borrowers’ access to affordable rural housing financing in areas with populations up to 35,000. The loan may be used to construct and purchase single-family homes, including manufactured homes and eligible condominiums. The amount covers purchasing a lot, reasonable construction administrative costs, contingency reserves, inspection fees, builder’s risk insurance, landscaping costs, and other authorized items, the ...

Fannie Mae this week released details about a pilot program that explores an alternative to how private mortgage insurance is placed on loans the government-sponsored enterprise acquires.

The credit risk profile of incoming FHA business has shifted significantly since the beginning of last year, according to a new Inside FHA/VA Lending analysis of Ginnie Mae mortgage-backed securities data. The biggest development has been the growth of loans with high debt-to-income ratios. There has also been a significant increase in the share of refinance loans that are cash-out transactions. FHA officials are well aware of these developments, having publicly mentioned them in testimony on Capitol Hill and at industry conferences. Officials have also raised concerns about FHA loans with downpayment assistance, although the MBS data don’t seem to indicate that there has been much change on that score. Among FHA loans endorsed in April and May, only 41.9 percent were at or below the benchmark DTI test for qualified mortgages, which is 43 percent. Through 2015 and 2016, well over half of new ... [Chart]