Private Mortgage Insurance Today Presented by: Susie Avery – United Guaranty Mike Kull – Mortgage Guaranty Insurance Corporation

Private Mortgage Insurance – Industry Overview Current market conditions How is MI fitting in and helping out (purchase through servicing) Private MI vs FHA as a purchase option Solutions available for buyers How MI is assisting homeowners in default Proposed regulation and the future of private mortgage insurance

U.S. Economy Recovery continues to be weak, with fear of another dip Unemployment rate continues to be high, along with under-employed and those who have given up on looking for employment Private sector job creation is sluggish Home sales are down from 2010 Home values continue to drop Borrowers continue to struggle with making payments

Indiana Statistics Unemployment rate at 8.7% in August vs 9.1% for the entire United States (US Bureau of Labor Statistics 9/16/11) Employment down 28,300 from 7/10 – 7/11 (US Bureau of Labor Statistics 9/2/11) Home sales in Indiana this year, through July, are down 8.5%, with pending sales down 10.5% and new listings down 11.5% (Indiana Association of REALTORS) 2 nd quarter home sale prices in Indiana fell 1.33% from a year earlier (Federal Home Finance Agency 8/24/11)

Indiana Statistics (cont’d) Past due mortgage payments as of the 2 nd quarter include: 9.51% of all loans (FHA 13.3%) 4.56% of all loans are 30 days past due (FHA 6.3%) 3.35% of all loans 90 days or over (FHA 4.69%) Foreclosure inventory stood at 4.86% of homes (Mortgage Bankers Association 8/22/11)

Housing Affordability At near all-time highs (National Association of REALTORS) with rates at historic lows (Freddie MAC) 1.2m – 1.4m new households projected to be formed annually between 2010 – 2020 Minorities will account for 70% of this growth Persons born between 1979 and 1994 will account for the majority of growth

Private MI Market Assistance Constantly reviewing housing and delinquency data and adjusting guideline and pricing models Working with and educating lenders nationwide to improve home purchase and refinance options and consumer education Adding to staffing to help lenders and consumers nationwide with mortgage delinquency challenges Advocating at both the national and state levels of government for informed legislation and regulation of the mortgage industry

Private MI Market Assistance (cont’d) 50% of every premium $ set aside for claims Historic support of housing market with claims paid: $6B in the 1980s $8B in the 1990s $22B paid since 2007 with expected total of $30B! Private mortgage insurance is private capital, not taxpayer $$$!

FHA 2010 FHA statistics: Accounted for 40% of all originations Insured 1.1M homeowners 40% of FHA loans were 95% loan-to-value or greater 70% of FHA borrowers invested their own funds as down payment The average FHA purchase price was $167,782 FHA Insurance Fund Target of 2% Fell to below.5% in 1 st quarter of 2011

Private MI Advantages vs FHA Private MI companies want market share increase while FHA wants to pull back Mortgage insurance cost is less Flexibility in premium options and structure Lower or comparable monthly payment Increase in equity, not the loan amount Opportunity for MI cancellation earlier (as little as 2 years vs 5 for FHA)

Private MI vs FHA (cont’d) FHA offers few options for payment of premium With FHA, credit scores do not impact pricing, only loan-to-value Private MI has many different options as ‘one size does not fit all’ Consumers should ask lenders questions as to options available and best fit for them

Private MI Assistance in Default Situations – Private MI Loans Not interested in owning properties! Works primarily with lenders as they are the insured party Significantly increased loss mitigation staff in recent years Pre-purchase education for prospective homeowners, including on-line, for default prevention MICA web site for education tools at

Proposed Regulations Impacting Private Mortgage Insurance Qualified Residential Mortgage (QRM) Qualified Mortgage (QM)

Qualified Residential Mortgage Part of Dodd-Frank Bill 8 months to prepare and 360 pages long Minimum 5% retention risk by lenders Narrow definition that includes; 20% DP on purchases, 25% equity in refi. and 30% cash-out refi., 28/36% ratios, 0 x 60 in last 24 mos., fully documented, and, no ARMs or interest –only As written, significant impact on mortgage availability Fannie Mae, Freddie Mac are exempt until no longer supported by gov’t., along with FHA and VA

Qualified Mortgage Part of Dodd-Frank Bill Requires lenders to verify and document income, Tasks the CFPB to issue regulations covering the originator confirming the borrower’s ability to repay, that they did not steer a consumer to the loan they chose outside of a QM, and, prohibits originator from engaging in abusive or unfair practices that promote disparities among consumers of equal credit worthiness

Private MI Going Forward Larger share of the market with FHA wanting to reduce their share Over $250B in capacity to serve the needs of the US housing market Evolving products and pricing to service new market(s)

Questions?