The current regulatory environment threatens to lock out low-income borrowers from the housing market and endanger the economic recovery, according to the head of the Mortgage Bankers Association.
MBA President and Chief Executive Officer David H. Stevens notes that while credit standards had grown too loose, the pendulum has swung too far the other way — with policymakers choking off credit today.
He explained that while the trade group a year ago called for policymakers to work together and include the industry in policymaking decision — that has not happened.
Stevens made his comments Monday at MBA’s 100th Annual Convention and Expo being held in Washington, D.C., this week, according to a copy of his prepared statement.
More than 4,000 people are in attendance at the event, according to Stevens — who served in the Obama administration as Federal Housing Commissioner.
“So I stand here today to say, in the politest way possible– enough is enough,” Stevens exclaimed. “The overcorrection and conflicting policies that continue to come out of Washington are threatening not just this market, but they are threatening the recovery.”
Policymakers are clamping down on risk, increasing pricing on government lending and pursuing enforcement actions that are impeding economic health.
He called the current regulatory environment “a landscape of confusion, excess, piling on, and dysfunction standing in the way of true economic recovery.”
Stevens noted that pending legislation in Congress could curtail Federal Housing Administration lending because of extraordinary indemnification provisions.
On Fannie Mae and Freddie Mac loans, programs for borrowers with low down payments and average credit scores have been all but eliminated. He noted that the two government-controlled companies are not taking risks given current loan-level price adjusters on top of base guarantee fees, adverse market fees and mortgage insurance fees.
Stevens said that the very people policymakers are attempting to protect are being harmed by current regulations. Home Mortgage Disclosure Act data for 2012 indicates that denial rates were more than 50 percent for black borrowers on conventional, non-jumbo, purchase loans.
“There’s a patchwork of stifling regulation and legal actions for as far as the eye can see. If lenders make one wrong move — or in some cases, even one right move — they could be caught up in a web of confusion based enforcement actions,” Stevens stated. “Put backs and indemnifications on any error, even completely non-material errors, class actions, settlements, Justice Department suits, state attorney’s suits, treble damage penalties from False Claims Act suits – need I go on?”
The trade group chief warned that the current environment could prevent consumers with modest means from buying homes as a “perfectly risk-free, safe and sound housing finance system” develops.
As he previously did, Stevens is calling for politicians to establish a national policy coordinator to ensure new regulations don’t conflict with each other. He is also asking for greater transparency from the Federal Housing Finance Agency, Fannie and Freddie.
“And while we have been through some challenging times over these last few years, I would argue that today the importance of this moment of reflection has never been greater,” the MBA leader stated.
