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While there may be an oversupply of single-fam- ily housing, the Nation could actually see a shortage of multifamily housing as early as 2012. I would point out they are also a big economic powerhouse. Apartments also produce impor- tant societal benefits.

They are environmentally sustainable, re- source and energy efficient, and help create a mobile workforce that can relocate for job opportunities, no credit checking loans Iowa and that is something I think is especially important in this recovery. I highlight these things to help you understand why it is so im- portant that Congress consider the unique needs of the apartment industry as you pursue reform options.

Solutions that work for sin- gle family will not necessarily work for multifamily. To that end, let me share with you what works and what does not work in the current GSE system. I am not here to defend the GSEs or to suggest that they continue in their current form.

I simply want to highlight the multifamily elements that are working and working at no taxpayer expense. The existing GSE multifamily housing finance system has at- tracted enormous amounts of private capital, helped finance mil- lions of units of market-rate workforce housing, and all of this without direct Federal appropriations. It has filled a critical gap when private capital disappeared and ensured liquidity was avail- able to refinance maturing mortgages.

In stark contract to the GSE single-family business, the multi- family programs were not part of the meltdown and are not broken. Overall loan performance remains strong, with delinquency and de- fault rates at less than 1 percent.

They have outperformed CMBS, commercial banks, and even FHA. The most recent crisis underscores the need for a capital source that will be available in all markets at all times, not just in New 138 York City, but also in Sioux Falls, South Dakota, and Birmingham, Alabama. Unlike residential mortgages, which are typically for 30-year terms, most multifamily mortgages are for periods of seven to 10 years and do not fully amortize. Property upkeep would have suffered and fewer units would have been built. Finally, I would like to share a little known fact about the units financed by Fannie Mae and Freddie Mac over the last 15 years. Fully 90 percent of these units, more than 10 million in total, were affordable to families at or below the median income for their com- munity without requiring Federal appropriations and at no tax- payer risk. In other words, workforce housing for teachers, nurses, and first responders.

In conclusion, the liquidity provided by the Government-sup- ported secondary multifamily mortgage market lowers the cost of capital to borrowers, which encourages the construction of more multifamily housing. Without it, higher interest rates and debt service costs would mean fewer multifamily units and higher rents.

I once again ask Congress, as it looks at reforming the housing finance system, that it do nothing that would jeopardize the con- struction, financing, and availability of multifamily housing.

I thank you for this opportunity to present the views of NMHC and the National Apartment Association.

STATEMENT OF GREG HEERDE, MANAGING DIRECTOR, AON BENFIELD AND AON BENFIELD SECURITIES Mr. Chairman Johnson, Ranking Mem- ber Shelby, and Members of the Committee. Private mortgage insurance provides protection to lenders, inves- tors, and most importantly, taxpayers by standing in the first loss position in the event that a borrower stops making payments. Pri- vate mortgage insurance also expands home ownership by allowing 139 qualified borrowers with less than the 20 percent prescribed down payment to purchase a home.

Private mortgage insurance is also an alternative to the Federal Housing Administration mortgage in- surance program. This protects not only the lenders and investors, but the prospective bor- rowers by ensuring that the home is affordable at the time of pur- chase.

Private mortgage insurers also have clear incentives to mitigate losses once loans become in default.

The largest beneficiary of these payments has been and will be Fannie Mae and Freddie Mac, thereby reducing a material amount of exposure to the taxpayer. Reinsurance is another form of capital available to the insurance industry.

Private reinsurers also play an important role in supporting mortgage insurance in a number of other countries, including Aus- tralia, Canada, and the United Kingdom. These countries have mortgage finance systems that are each unique with varying Gov- ernment roles, but it is important to note that private reinsurance plays some part in all of these. Since the beginning of the financial crisis, new capital has come into the sector in the form of a new start-up mortgage insurer no credit checking loans Iowa and as significant contributions to existing carriers.

In addition to the capital that was raised, Aon Benfield Securi- ties represented a qualified management team in 2009 seeking to form a new mortgage insurance company. This plan was ultimately shelved as the capital providers witnessed the substantial growth of the Federal Housing Administration, coupled with the uncer- tainty surrounding the future of Fannie and Freddie, which was viewed as weakening the demand for the mortgage insurance prod- uct and, therefore, the need for new companies. There were other efforts during the same period to introduce new mortgage insurance companies in various forms, some of which re- ceived indications that they would not receive approval from Fannie and Freddie to write no credit checking loans Iowa business, resulting in these efforts being shelved, as well. If a decision is made to reduce the role of Fannie over time, and that decision results in increased demand for private mortgage in- surance at commercially responsible terms, we are confident that sufficient private capital would be available to support that in- 140 creased demand. Reinsurers are also eager to underwrite new risks, and reinsurance capacity is clearly available to support the mortgage insurers by providing capacity that will allow them to in- sure more loans as the housing market rebounds and demands for mortgage insurance grow. As consideration is given to the reduced Government role in sup- porting mortgages, another area that will require private capital is in covering earthquake exposure. GSEs currently require under- lying mortgages to be insured against most perils, including fire, hurricane, and flood, as applicable. No such requirement exists for the earthquake peril, representing a multi-billion-dollar subsidy currently provided by the taxpayers.

Private capital retaining the underlying mortgage risk is likely to require all underlying insur- able risk to be covered. We are pleased to report that there is ample insurance and reinsurance capacity to absorb this risk.