Report: Proposal Could Raise Mortgage Costs

Wall Street Journal
Wednesday, August 27, 2014

Proposed requirements on private mortgage insurers under consideration by the Federal Housing Finance Agency would protect Fannie Mae and Freddie Mac from another financial crisis, but could end up raising mortgage costs for thousands of borrowers according to a new report from Moody's Analytics and the Urban Institute. The report authors say that the new rules would lead borrowers to pay an extra 0.15 percentage point in mortgage insurance premiums. Borrowers with low credit scores who make a 5% down payment could pay an extra 0.7 percentage point. At issue are how much liquid assets insurers should have to hold against their liabilities and what the insurers should be allowed to count as capital. The authors believe mortgage insurers should be allowed to count a portion of future insurance premiums, which the draft requirements don’t allow.