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ICBA: Private Mortgage Insurance Critical to Housing Recovery

Without PMI, Housing Recovery Will Take Longer

Washington, D.C. (July 29, 2010)-Marti Rodamaker, president of First Citizens National Bank in Mason City, Iowa, testified today on behalf of the Independent Community Bankers of America (ICBA) before the House Financial Services Capital Markets Subcommittee. During her testimony, the Iowa community banker stressed that private mortgage insurance (PMI) is critical to the nation's housing recovery and any reform of it must be made in coordination with other elements of housing finance reform.

"Community bankers like me are eager to serve our customers, those who live and work in our local communities, when they're ready to purchase a new home by offering straightforward home loans that we are confident they can repay," said Rodamaker. "Our nation's nearly 8,000 community banks are critical to the housing recovery because we offer prudent, common-sense loans with properly managed risk. Appropriate risk management, coupled with a functional market for PMI will be key to America's housing and economic recovery."

Rodamaker explained that mortgage insurance has been very important for younger first-time homebuyers, for whom a 20 percent down payment could be an insurmountable barrier to homeownership. She also said that in today's environment even current homeowners who want to move may not have enough equity in their homes to sell and make a 20 percent down payment on a new home. "The recession has drained the savings accounts of many Americans, depleting another source of down payments. Given these circumstances, PMI can be used to serve a broader segment of homebuyers than ever before. Without PMI, the housing recovery will take longer; with PMI, the recovery can be managed prudently," Rodamaker said. 

Like all lenders, community banks need PMI to access funding. "The only practical means of making high loan-to-value loans, whether they're sold or held in portfolio, is with the credit enhancement provided by PMI. If lenders don't have the flexibility to make high LTV loans, the housing recovery will take longer," she said.

Rodamaker closed by saying that the recent dislocation in the PMI industry has only underscored the critical role that it plays in housing finance and that restoration of a strong and competitive PMI industry will be a critical part of the housing recovery. 

To read today's testimony, visit http://www.icba.org/.