DALLAS, Nov. 21, 2016 – ValueInsured, the only provider of down payment protection, submits a response to the Federal Housing Finance Agency’s (FHFA) Single-Family Credit Risk Transfer Request for Input (RFI). The RFI was issued to “assist FHFA and the Enterprises in their ongoing analysis of font-end credit risk transfer transaction structures in which a portion of the credit risk is transferred prior to Enterprise acquisition of the underlying mortgage.”
In its submission, ValueInsured outlined why down payment protection could be one of the most effective and far-reaching credit risk transfer (CRT) solutions, citing:
- Down payment protection (DPP) represents an additional up-front risk transfer mechanism not currently in use;
- DPP is the only upfront risk transfer mechanism designed to modify borrower behavior so as to avoid defaults;
- In contrast with other CRT mechanisms that only deal with default scenarios, DDP-related loans would be de-risked before getting onto the GSE’s balance sheets;
- For the period just prior to and during the housing crisis (1999 through 2008), DPP covered transactions would have provided approx. $2.2 billion of coverage toward borrower down payments on loans that ultimately went into foreclosures, and an additional $37.24 billion to cover borrowers’ home equity losses;
- DPP-related loans backed by major reinsurers represent an efficient use of capital that positively impacts the cost structure of residential mortgage loans.
