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Genworth Responds to PMIERs & Guarantee Fees Requirements

09/09/14

Company supports regulatory improvements, but seeks adjustments to current proposals

RICHMOND, Va., Sept. 9, 2014 /PRNewswire/ -- Genworth U.S. Mortgage Insurance ("Genworth"), a unit of Genworth Financial, Inc. (NYSE: GNW), submitted its response to the Federal Housing Finance Agency (FHFA) regarding the draft Private Mortgage Insurance Eligibility Requirements (PMIERs), which Fannie Mae and Freddie Mac ("Enterprises") would use to approve private mortgage insurers that provide mortgage insurance on loans owned or guaranteed by them. In addition, Genworth filed a response and shared recommendations for the FHFA's request for public input regarding the current state of Guarantee Fees ("G-fees").   

"Genworth appreciates this thorough effort to increase the financial strength of the private mortgage insurance industry and reinforce the vital role of private mortgage insurance in the U.S. housing finance system," said Rohit Gupta , Genworth MI's president and CEO.  "We remain committed to working with the FHFA and the Enterprises to implement progressive and transparent reform for strengthening the MI industry. We aim to strike a balance between implementing reform that enhances credit risk protection while ensuring affordable access to mortgage credit for first-time homebuyers, low-to-moderate income borrowers and members of underserved communities." 

Outlined below is an overview of the key issues addressed in Genworth's response to the current PMIERs and G-fees proposals as well as recommendations for consideration:

PMIERs

Appropriate Credit for Future Premiums – Genworth recommends inclusion of 210% of prior year's premiums in the asset calculation for loans insured after 2008. This is the same methodology the Enterprises applied to the 2008 and prior year vintages.

"Seasoning" Factors – Loan seasoning is a material factor in assessing the probability that a loan will go into default. The longer a mortgage loan remains performing, the lower the probability of future default. As a result, the asset test should be revised to recognize the impact of loan seasoning on probability of default for newer books.

Counter-Cyclical Asset Test – Genworth supports an asset test model that acts counter-cyclically -- building capital during strong markets in order to use a portion of that capital to pay claims during downturns while continuing to write new business to support the housing recovery.

Capital Factor Granularity and Transparency – More transparency into the development, as well as granularity of, the capital factors used in the PMIERs is essential for appropriate capital and business planning purposes.  Specifically, Genworth is recommending changes to the capital factors applied to 2005-2008 vintages and non-performing insured loans, and adding more granularity for LTVs below 85%.

Governance Provisions – Genworth would like more details provided and documented regarding how changes to an MI's status or proposed restrictions will be imposed.  In an effort to assist with this issue, Genworth has provided a redlined version of the PMIERs that includes revisions that address its concerns.

Guarantee Fees

Today also marked the comment period close of the request by the FHFA for public input regarding Enterprise G-Fees. As such, Genworth's response to the request included the following recommendations:

  1. Formally withdraw the G-fee increases proposed by former Acting Director DeMarco
  2. Discontinue the existing adverse market fees without implementing offsetting increases elsewhere
  3. Existing loan level fees based on FICO scores and LTV percentages should give full and transparent recognition for the credit loss mitigation from private MI and so should be eliminated or materially decreased  
  4. Require GSEs to provide sufficient transparency into their pricing models

Following are links to the full materials issued by Genworth:

Genworth PMIERS Comment Letter
Genworth G-fees Comment Letter

About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company committed to helping families become more financially secure, self-reliant and prepared for the future. Genworth has leadership positions in long term care insurance and mortgage insurance and competitive offerings in life insurance and fixed annuities that assist consumers in solving their insurance, retirement and home ownership needs.

Genworth operates through three divisions: U.S. Life Insurance, which includes life insurance, long term care insurance and fixed annuities; Global Mortgage Insurance, containing U.S. Mortgage Insurance and International Mortgage Insurance segments; and the Corporate and Other division, which includes the International Protection and Runoff segments. Products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth, headquartered in Richmond, Virginia, traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com. From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com. From time to time, Genworth's publicly traded subsidiaries, Genworth MI Canada Inc. (TSX: MIC) and Genworth Mortgage Insurance Australia Limited (ASX: GMA), separately release financial and other information about their operations. This information can be found at http://www.genworth.com.au and http://genworth.ca.

SOURCE Genworth Financial, Inc.

Media: Jennifer Abraczinskas, Genworth U.S. Mortgage Insurance, 919 870.2195, Jennifer.abraczinskas@genworth.com; Investors: Amy Corbin, Genworth Financial, 804 662.2685, amy.corbin@genworth.com

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