The introduction of private capital and the development of a credit risk transfer mechanism could help the Federal Housing Finance Agency more effectively manage the taxpayer risk from its portfolio of first-time homebuyers, low-income borrowers, and consumers with limited credit history, a reinsurance executive testified before the U.S. House Financial Services Committee’s Housing and Insurance Subcommittee today, December 6, 2017.
Fourth in an ongoing series of legislative discussions on the topic of housing finance reform, the hearing focused on assessing various views and perspectives from industry experts.
“Today was an important step towards reforming our housing finance system, credit enhancement, and credit risk transfers,” said Subcommittee Chairman Sean Duffy (R-WI). “Expansion of private sector capital into the housing finance system should be a key goal in any restructuring of the system. We’ve seen how successful these products have been in offloading risk in recent years and the federal government has engaged in these products and programs to some extent.”
“It’s important that we investigate further how reinsurance already plays, and can play an increased role, in offloading risk in the housing market. As with any private sector capital product, we must look at the availability of coverage, or capacity, and the impact of cyclicality on these products. While I believe these products will ultimately help bring in capital to the housing finance system, we must make sure taxpayers are protected and not left holding the bag in economic down cycles,” Chairman Duffy added.
“Hurricane Irma highlighted one of the reasons mortgage credit risk offers an attractive opportunity to reinsurers,” the reinsurance executive said. “It simply does not have any meaningful correlation to most of the other lines of business reinsurers write.”
To view today’s witness list and access each individual’s written testimony, along with a video replay of the hearing, click here.
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