PMI Group Inc., which last month agreed to refund New York homebuyers for overcharges, is trying to shine a spotlight on the good it does.

In the last few years the private mortgage insurer has made serious efforts to help poor people get housing, said Roger Haughton, its chief executive officer, in an interview last week.

He said the San Francisco-based company has:

  • Funded 20 Habitat for Humanity homes since 1995, of which its employees have helped build 10.
  • Committed $2.5 million to its Gateway Initiative, which funds homes on Native American tribal lands and in Hispanic communities in inner cities.
  • Committed $1 million with Bay-area neighbor Wells Fargo & Co. for an outreach and education program.
  • Committed with Washington Mutual Inc. of Seattle to insure $200 million of 1% down payment loans to lower-income borrowers.

In addition, PMI officials say the company is the first to participate in a new California state income tax credit program. So far it has made $400,000 of interest-free deposits in community-based lending organizations through the program.Mr. Haughton said that despite a pervasive belief in the financial services industry that lower-income borrowers represent a higher risk than most, he has found the opposite is true.
"We have learned over the years that our affordable housing loans have performed to the same level as our regular book of business," he said. "There was a perception that affordable housing loans were more risky, and the truth be known, that's probably just the opposite."

Moreover, Mr. Haughton said there is a basic difference between homeownership for investment and homeownership for shelter, which keeps the borrowers from defaulting.

"What you find out is that homeownership for shelter is exactly what affordable housing is about," he said. "These families that we've helped over the years never thought they'd have the opportunity for homeownership, and they are not about to lose that opportunity."

Habitat for Humanity's requirement that the homebuyers help build the home can contribute immensely to their keeping the home, Mr. Haughton said. "Habitat says you have to put in sweat equity, and the homeowner is working side by side with us to build it. Their sweat is going into that house, and I'll tell you, there's no way in the world they're going to foreclose on that house. They will do everything they can to stay there."

Mr. Haughton said he likes to tell the story of a 12-year-old boy in South Central Los Angeles who was asked at a Habitat function to talk about what homeownership meant to him.

"This child said that he finally had a bedroom where he could do his homework, and he just broke down," he said.

In addition to providing financial support, any successful affordable housing effort must be accompanied by education and backed by corporate partnerships to share in the risk, Mr. Haughton said.

"You've got to provide the counseling and education so they understand what homeownership is, what it takes to get there, and what it takes to make sure they can meet monthly commitments," he said. "We're not just putting people in houses. We're actually making sure that they're prepared to be in those houses."

If all the players involved in the process have something to gain and something to lose, then chances are the affordable housing program is not going to work, he said. "Partnership between all the players and the mortgage lender is extremely important."

PMI uses layered co-insurance in many of its partnerships, which involves a risk-sharing arrangement between the mortgage insurer and an outside group, the spokesman said. In some of these arrangements PMI agrees to insure mortgages with special terms, such as a 1% down payment or expanded underwriting, and the outside group puts up money as collateral and agrees to help cover losses.

Last month the company and five other mortgage insurers agreed to refund New York homeowners $4 million for overcharges.

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