Housing advocates say the new, lower benchmarks generally favor middle- and working-class borrowers at the expense low-income and very low-income borrowers.
A negative profitability gap means the guarantee fees on newly acquired loans weren’t enough to cover the expected cost of guaranteeing the loans and earning the expected return on capital.
Although high interest rates have cut into GSE acquisitions, depriving PMIs of new business, they have also prevented homeowners from selling, allowing insurers to hold on to the business they have.
Even with the implementation of new asset haircuts and other restrictions into the private mortgage insurance eligibility requirements framework, GSE-approved insurers say they will still have large available asset buffers.
Stakeholders say the GSEs’ proposed definition of “first-generation homebuyer” in their equitable housing-finance plans unfairly excludes many of the people the enterprises and the FHFA want to help.
According to Urban Institute, mortgage insurance payouts mean GSE losses on loans with LTVs over 80% are comparable to those on loans with LTVs below 80%.
Will lower FHA premiums steal market share from the GSEs? According to analysts, private mortgage insurer pricing still makes the GSEs the better execution for borrowers with credit scores over 680. But private MIs are still nervous.
By some estimates, the enterprises will have to increase guarantee fees by about 3 basis points to offset the lost revenue from FHFA's targeted elimination of LLPAs.
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