As players in the secondary mortgage market meet in the Big Apple this week, the leader of the industry’s prominent trade group talked about the industry’s challenges.
Despite progress made by the industry with qualified residential mortgages,
Fannie Mae and Freddie Mac repurchases, and guarantee fees — more needs to be done.
That is according a speech that was delivered on Monday by David H. Stevens, who is the president and chief executive officer of the Mortgage Bankers Association.
Stevens made the comments in remarks delivered at the opening general session of MBA’s National Secondary Market Conference and Expo in New York, according to a copy of his prepared remarks.
Stevens described the geopolitical environment as a “confusing and fragile” one that will impact all mortgage-related business.
He explained how the industry is coping with
with thousands of pages of new laws and regulations impacting every part of the business. Companies are also under attack by the government’s use of the civil war-era False Claims Act.
“And while the simple fact is that today’s mortgage lending environment is the most conservative, safest we have ever seen, most lenders still feel like we are under attack,” Stevens said. “Add in a political atmosphere complete with broad brush accusations in political rhetoric that only perpetuate anger towards an industry that’s sole purpose is to provide real estate finance opportunities to qualified borrowers, and it can be tough not to want to fight back.”
He highlighted how a long-term solution is needed for
the Qualified Mortgage rule, which allows Fannie and Freddie to purchase loans that don’t meet the 43 percent debt-to-income ratio required by the QM rule. This “patch” was requested by the mortgage industry as it sought to understand the impact of QM on the market.
But the government-sponsored enterprises can only purchase such loans until they are out of conservatorship or for seven years — whichever takes place first.
So when this “patch” expires or if Fannie and Freddie change their underwriting requirements —
a whole segment of qualified potential borrowers will no longer have access to home financing.
Stevens outline a host of other occurrences that could impact QM, such as the appointment of a new director at the Consumer Financial Protection Bureau
or Federal Housing Finance Agency whose views differ from those currently in place.
“The QM rule needs to stand on its own two feet,” Stevens explained. “It should not be a rule that essentially punts all credit decisions to two companies that are not even regulated by the same agency.
“More importantly, the rule should demand the same credit approval process for a borrower, regardless as to whether the loan is being sold to a GSE or a private investor, as long as all the other terms are the same.”
Stevens noted that the implementation of the common securitization platform needs to be more swift to ensure that critical advances already made won’t be reversed. He also called for the ability of the platform to support non-agency securitizations.
In addition, progress needs to accelerate for the current single-class securities, which won’t be implemented by both GSEs until 2018 — likely after FHFA Director Melvin Watt finishes his term.
“Now is not the time to slow down and we urge FHFA to maintain focus on a more aggressive time line,” Stevens said.
The MBA chief closed with a commitment to continuing the fight for a federal housing policy coordinator — a key housing policy expert at the most senior level in the next administration to help avoid confusion and conflict created by uncoordinated overlaps in rules across federal regulators.
