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Wednesday, March 20, 2013

LPI Mentioned in House Hearing: DeMarco Validates ABIA Concerns

During the March 19, 2013, HFSC Hearing on Fannie Mae and Freddie Mac (GSEs) conservatorships, lender-placed insurance (LPI) was only briefly mentioned in DeMarco's written testimony and during the hearing.

On page 9 of his written testimony, DeMarco states:
The various concerns with force placed insurance are well-known, including the costs, limitations on coverage, and consumer protections. From our perspective, we could have addressed some of these concerns with a narrowly focused approach that would contain costs for Fannie Mae and Freddie Mac, such as Enterprise self-insurance or a direct procurement of insurance coverage by and for the Enterprises. However, I believe that these Enterprise-centric options would do little to address the needs of a future mortgage market without the Enterprises. Therefore, we plan to pursue a broader approach, bringing together Federal and state regulators to participate in the dialogue with us and with a wide range of stakeholders. We would like to establish a set of standards that could be adopted by a broader set of mortgage market participants, similar to what was done with the Servicing Alignment Initiative. This broadened approach will also enable greater regulatory coordination in an effort to consider the various issues associated with force placed insurance.

This statement validates ABIA's comments included in a January 2, 2013 letter to FHFA regarding FHFA's decision to reject Fannie Mae's plan to require mortgage servicers to use a Fannie-approved consortium of Insurers.  In the letter, ABIA expressed concern about the lack of transparency and the absence of public input on Fannie’s initiative.

In addition, at the end of the hearing Rep. Duffy (R-WI) asked DeMarco about LPI. In his response, DeMarco stated, "I’m seeking to work with other regulators and with other market participants to come up with a market standard for how to improve the transparency and competition in this market place so that both borrowers and investors are better protected."

Read a transcript of the exchange between DeMarco and Rep. Duffy.

Watch a webcast of the HFSC Hearing.

Read DeMarco's testimony.

Read ABIA's Jan. 2 letter.