Publication DateJuly 2010
Private mortgage insurance has long played an important role in facilitating home ownership, and has recently provided an element of stability to the market.
A discussion about the role of mortgage insurance must begin by stressing the importance of giving families the opportunity to buy homes when they do not have enough accumulated wealth to make a big down payment, which is what primary mortgage insurance exists to do. This is not about speculative, ―no money down‖ schemes; this is about the first step to building family economic security and realizing the long-term benefits of homeownership. Access to this type of financing is critically important because home ownership continues to be the cornerstone of household wealth in the United States.
When done right, high loan-to-value mortgages are essential for the U.S housing system to offer opportunities and a pathway to the middle class. The overlay of state regulation and federal oversight has played a critical role in maintaining systemic stability within this industry.
Going forward, private primary mortgage insurance should have an important role in the market. At the same time three key provisos should be observed:
- Policy makers should see that a level regulatory playing field is maintained, one that considers long-term system-wide risk taking capacity and avoids a race to the bottom.
- Mortgage insurers (among others) must be held accountable through balanced and transparent pricing, leadership in foreclosure prevention, and providing broad access to good loans.
- Alternatives should be cultivated to foster innovation and increased access to safe mortgages for underserved markets.