Mortgage Professionals Should be Optimistic About the Future

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Th e M Rep o RT | 59 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET the latest new mi requirements expected in coming months FHFA to FinAlize rule implementing eligibility requirements For privAte mortgAge insurers in eArly 2015. t he conservator for Fannie Mae and Freddie Mac plans to release a final- ized rule governing capital requirements for private mortgage insurers in early 2015, according to a Decem- ber announcement from an industry trade group. Months after the Federal Housing Finance Agency (FHFA) first unveiled a rule establishing eligibility require- ments for private insurers, the agency informed some of the nation's top firms it doesn't plan to release a finalized rule until the end of the new year's the first quarter or later, U.S. Mortgage Insurers (USMI) disclosed. The rule, first announced in July, puts in place a set of standards to ensure firms working with Fannie Mae and Freddie Mac are able to provide capital even in adverse economic conditions. As stated in their charters, the GSEs are required to obtain private mortgage insurance or some other form of credit enhancement for mortgages they purchase with loan-to-value ratios above 80 percent. "FHFA's Strategic Plan calls on Fannie Mae and Freddie Mac to strengthen the requirements for private mortgage insurance compa- nies that do business with them in order to reduce Fannie Mae's and Freddie Mac's overall risk exposure and protect taxpayers," FHFA Director Mel Watt said upon releasing the ini- tial draft of the rule. Responses to the draft were mixed, with many trade organizations and companies saying the pro- posed requirements were too burdensome and could lead to increased borrowing costs and further restrictions on credit. Nevertheless, USMI says its members "remain united in support" of updat- ing eligibility requirements. "When finalized, those standards will confirm the long-term value of [mortgage insurance] for mortgage borrowers, lenders, and taxpayers," the group said. "Accordingly, USMI will continue to work closely with FHFA and the GSEs to finalize and implement the PMIERs and urges final- ization of these important standards." While the group's an- nouncement suggests FHFA originally planned to release a final version of the rule by the end of 2014, recent statements from the agency indicate otherwise. In a Senate Banking Committee hearing in November, Watt said FHFA is still in the process of evaluating comments gathered in the months following the draft's release, as well as comments regarding future increases to guaranty fees. "They are connected to each other in some ways that is not always obvious to the public," Watt told the com- mittee. "And we are trying to sort through those connec- tions, and I would expect . . . hopefully in the first quarter of next year we will bring greater clarity to that area." report Breaks down labor Force Hurdles pew researchers say 5.8% unemployment rate is misleading considering people not counted in labor force nears all-time high. t he October 2014 Employment Situa- tion Summary released by the U.S. Bureau of Labor Statistics (BLS) on November 7 reported a nation- wide unemployment rate of 5.8 percent, the lowest level in more than six years. That figure might be some- what misleading, however. A report released recently by the Pew Research Center indi- cates that although the U.S. unemployment rate is low, the number of people who are "not in the labor force," meaning they are not counted among the unemployed in the BLS survey, is near an all-time high. BLS reported about 37 percent of America's civilian population, or about 92 million people, currently belong in the "not in the labor force" category because they are not employed and have not searched for work recently, therefore they are not considered unemployed by BLS even though they don't have a job. About 93 percent of those not in the labor force, or 85.9 million, are not part of the labor force simply because they do not want a job, BLS reported. While some have speculated large numbers of retiring baby boomers are responsible for the spike of individuals not in the labor force, BLS found an increase in the percentage of young adults between the ages of 16 and 24 who don't want a job is largely to blame for the in- creasing numbers of those not in the labor force. The percentage of individuals in that category rose to 39.4 percent over the first 10 months of 2014, whereas it was 29.5 percent as recently as 2000. BLS reported a much smaller increase in that category among adults ages 25 to 54 (16.9 percent) and a decline in that category for adults 55 and older (58.2 percent). BLS disclosed in the October employment report that the number of people "margin- ally attached" to the labor force declined slightly from September down to 2.2 million. Someone who is marginally attached is currently not employed but avail- able for work and has searched for a job in the previous year, but not in the previous four weeks, according to BLS. Marginally attached workers are not consid- ered unemployed by BLS. While some may believe feel- ings of discouragement about job prospects account for a large number of those marginally attached to the labor force, BLS found that only 35 percent of the 2.2 million individuals at the margin (about 770,000) had not recently searched for a job be- cause they were discouraged. The biggest reason was the "other reasons" category that included child care issues, transportation problems, and other difficulties, with 37.1 percent (about 816,000). Other reasons for being margin- ally attached to the labor force included family responsibilities (11.3 percent), school or training (10.4 percent), and ill health or disability (6 percent).

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