Industry Urges More Capital Support for Private MIs

Housing industry groups are urging the Treasury Department to provide capital support for the private mortgage insurers so more financing will be available for homebuyers that can't muster a 20% downpayment. In a letter to Treasury secretary Timothy Geithner, the trade groups warn that "a vibrant housing market will not be possible unless new homeowners enter the market." They point out that a $1 billion capital infusion into the MI companies would allow lenders to finance $80 billion in purchase mortgages that could be sold to Fannie Mae and Freddie Mac. (By charter, the GSEs cannot finance mortgages with less than 20% down unless they are credit enhanced with private mortgage insurance.)"This increased level of financing is critical to meet the demands of potential homeowners, restore growth in the market and reduce the excess supply of homes," the five trade groups say. The Financial Services Roundtable, Mortgage Bankers Association, National Association of Home Builders, National Association of Hispanic Real Estate Professionals and Asian Real Estate Association of America signed the letter. GSE regulator James Lockhart also has called on Treasury to provide support for the capital-constrained private MIs.