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Angel Mas, president of Genworth’s European Mortgage Insurance business commented:
“We welcome Grant Shapps’ speech at the BSA conference today, in which he declared there is ‘a role to be played’ by mortgage insurance in achieving a balance between first time buyer access to the housing market, and prudent lending. The comments are another stepping stone towards mortgage insurance (MI) being accepted as part of the solution to the first time buyer challenge.
“We still believe there is a need for a clear regulatory framework that incentivizes the use of mortgage insurance with high loan-to-value mortgages. As Shapps referenced, in the good times, lenders are happy to write as many high LTV loans as they can, effectively competing on risk. But as the cycle turns the availability of loans, understandably, reduces. However, it’s important - not only to borrowers themselves, but to the economy overall - that the flow of credit remains open to financially stable first time buyers, even in the bad times. We believe this pendulum effect should be addressed through a new framework, one that promotes prudent lending, but also creates a level playing field.
“This year we have finally seen some encouraging moves towards an insurance solution as a means of mitigating lenders’ risk on loans, through FSA recommendations late in 2010 leading to Genworth’s partnership with Mutual One to bring MI capability to smaller building societies. However, we still need to see clear, realistically achievable regulatory incentives for lenders who use mortgage insurance, therefore ensuring that their HLTV mortgages are loaned prudently and responsible. Regulators across Europe are currently moving forward to set predictable benefits that lenders will receive for adding this protection to their loans, so we are keen to see an organized and well thought through set of incentives put in place in the UK to match this and we continue to work towards this goal.”
