WASHINGTON — U.S. Mortgage Insurers (USMI), the association representing the nation’s leading private mortgage insurance (MI) companies, submitted its comment letter to the Federal Housing Finance Agency (FHFA) for its re-proposed Enterprise Regulatory Capital Framework (ERCF). In its letter, USMI emphasizes the importance of constructing a balanced, transparent, and analytically justified post-conservatorship capital framework for the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.

“USMI supports FHFA’s efforts on this important rulemaking. While sufficient levels of capital are important to the sustainable operation of Fannie Mae and Freddie Mac, excessive capital requirements could have a detrimental effect on mortgage availability and costs for consumers, and can inadvertently push mortgage lending outside of the conventional mortgage market,” said Lindsey Johnson, President of USMI. “As FHFA advances this rulemaking, a balance must be struck between prudently managing the GSEs’ risk and protecting taxpayers, while also ensuring that affordable low down payment mortgages remain available for borrowers.”

In its comments, USMI notes the important issues and specific components of the proposed rule that require further attention, as they could potentially create unintended negative consequences. USMI urges the adoption of a final regulation that appropriately balances taxpayer protection and support for the housing markets, consistent with the GSEs’ charters and unique role in the mortgage finance system. Continued access to sustainable, affordable conventional mortgages is particularly important for minorities, lower income individuals, and first-time homebuyers.

Further, USMI advocates for a rule that gives interested parties the opportunity to fully understand the basis for the elements of the proposal and submit beneficial comments to FHFA. USMI, along with other industry participants, continue to be concerned that subjective determinations have the potential to cause great harm to the housing market and are inappropriate if the GSEs are released from conservatorship. Moreover, the current proposed rule would require capital levels that are significantly higher than is necessary for the GSEs’ post 2008 financial crisis and does not reflect the improved loan underwriting required by the GSEs and the Dodd-Frank Act.

USMI’s comments also caution FHFA to avoid adopting a bank capital model given the insurance nature of the GSEs’ business, suggesting they should be subject to an insurance capital framework and that, if necessary, adjustments can be made to account for systemic risk. Additionally, USMI recommends that the risk-adjusted capital rule should be based on credit risk and be as risk-sensitive as possible, having non-credit risk concerns addressed through separate regulatory requirements.

USMI also advocates for more transparent and objective treatment of the GSEs’ counterparties, especially private mortgage insurers that meet a set of rigorous capital and operational requirements known as the Private Mortgage Insurer Eligibility Requirements (PMIERs). USMI adds that private mortgage insurers should not be subject to additional measures of creditworthiness given they already comply with, and exceed, PMIERs. Further, USMI suggests that the proposed rule should promote private capital through the use of both loan level credit enhancement, such as private MI, and through responsible credit risk transfer (CRT). For CRT, the proposed rule should be adjusted to reflect the risk-reduction benefit that is attained by properly priced CRT, and eliminate non-credit risk related buffers that overly penalize CRT to a point that will disincentivize the GSEs’ from de-risking.

Finally, USMI underscores that a revised capital standard is only one element of GSE reform, writing: “The FHFA should use its considerable authority, both as the regulator and conservator, to take steps to ensure that the GSEs are appropriately regulated and do not cross the bright line between primary and secondary mortgage markets. Specifically, we believe that the GSEs should be subject to utility-like regulation, with capped rates of return, restricted to explicitly authorized secondary market activities, and with open and transparent underwriting engines and systems, and publicly disclosed pricing. Doing so would maintain the GSEs as market makers, provide stability through different market cycles, protect taxpayers, and ensure accessibility to sustainable and affordable mortgage finance credit.”

USMI’s full comments on the 2020 NPR can be found here and an executive summary can be found here. Its comments on the 2018 NPR can be found here.


U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at

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