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MBA Sounds Battle Cry For Independent Mortgage Banks

by devteam December 6th, 2013 | Share

David H. Stevens, presidentrn& CEO of the Mortgage Bankers Association (MBA), said today that independentlyrnowned and operated mortgage bankers are the building blocks of MBArnmembership.  Stevens, speaking to MBA’s secondrnannual Independent Mortgage Bankers (IMB) Conference, said that nearly 55rnpercent of the association’s regular residential membership is comprised ofrnindependent mortgage banks and the strong growth of community lenders “providesrnour industry and our organization the opportunity to expand…to thrive…tornsurvive.” </p

MBA is the only tradernassociation representing the full spectrum of companies who finance housing inrnthe U.S., Stevens said, and it is working daily to ensure a business andrnregulatory atmosphere that allows independent mortgage bankers to make a profitrnand grow.</p

He spoke of some of the outreachrnMBA has done with IMB including hiring specialists in their area of concern andrndeveloping a presidential advisory group consisting entirely of IMBs.  These efforts have resulted in MBA hearingrnwhat members want such as testing of all loan officers under the SAFE Act regardlessrnof company size or structure. That is now official MBA policy, he said,rnand MBA aggressively pushes it with the Consumer Financial Protection Bureaurn(CFPB) and other regulators.</p

“While you are on thernfront lines, working each day with your customers, the MBA is on the frontrnlines in Washington fighting to protect your interests and the interests ofrnyour borrowers, Stevens said, “and together, we make a formidable team.”</p

Stevens said there arernchallenges involved with representing a diverse membership; the members do notrnalways agree so MBA strives to do what is right for the industry and forrnborrowers.  He pointed to the MBA’s fightrnto obtain a safe harbor in qualified mortgage (QM) standards for smallerrninstitutions when other trade associations were willing to settle for arnrebuttable presumption standard.  “Folksrnsaid that we were tilting at windmills, but when you lean in hard, you canrnwin.  And we did.”  </p

On Servicing Compensation,rnMBA led efforts to block the GSEs and FHFA from changing the minimum servicingrnfee on GSE loans to protect IMB revenues and ownership of the servicingrnasset.  Again, this was an issue that would have dramatically impactedrnindependent mortgage bankers, he said. “We fought it, we blocked it, and wernremain vigilant should this issue re-emerge.”</p

MBA is also fighting forrnuniformity in guarantee fees, based on loan quality and not size of the lenderrnor volume of loans.  “Guarantee fee parity is vital to your business andrnto a healthy, competitive and transparent market, so we are fully engaged tornmake this a reality in today’s market, as well as in any future secondary marketrnreforms.”  Stevens said MBA also led thernfight to align the QM and QRM rules and it seems that that battle is alsornnearly won.</p

He has been asked manyrntimes why MBA continues its policy for transition and reform of Fannie Mae andrnFreddie Mac (the GSEs) when they are profitable and the marketplace isrnstabilizing rather than pushing to tweak the GSE charters and remove them fromrnconservatorship.  We are not confident,rnhe said, that this would create a really health market for IMB in the long run.  The GSEs are producing record profits with thernhighest credit quality loans in history but they continue to charge steep LoanrnLevel Price Adjustments, Adverse Market Fees and Guarantee Fees that are threerntimes what they were a decade ago.  “In the effort to both crowd inrnprivate capital and prove the ability to produce profits, this all has to bernbalanced by the impact to the purchase market and costs to consumers. </p

The GSEs have producedrnhigh revenues from the HARP refinance program but the low down payment purchasernmarket has shifted broadly to programs within the GNMA security. As the FederalrnReserve stated in its recently released HMDA report:  There has beenrn”…almost no risk-taking in the [conventional] mortgage market in the aftermathrnof the financial crisis.”</p

Stevens said there arernother issues that remain to be addressed as the industry considers the future.  For example, </p<ul class="unIndentedList"<liDespite repeated callsrnby MBA for the Federal Housing Finance Agency (FHFA) to move toward a systemrnwhere fees are based on loan level risks, and not the size or volume of loansrnsold to the GSEs guarantee-fee parity is still not a reality, </li<liUnderwriting and pricingrntransparency are not clear and because of their impact in a QM world, openingrnthe black box credit rules is necessary to evaluate and identify opportunitiesrnwhere credit might be needlessly denied. </li<liThe decision to sell tornthe cash window or issue MBS should be a lenders based on best execution, not arnjudgment made for them unless there are clear, transparent, counter-partyrnstandards that might be cause to force a cash only path.</li</ul

Stevens said that thernGSEs are a critical component of the housing finance system but it is equallyrnclear that that structure that led to their demise and conservatorship presentrnopportunities to improve the system and create a more competitive and stablernsecondary market for IMB.  Winding downrnthe GSEs does not mean creating an entirely new system while completelyrndiscarding the old.  We need to fix whatrnwas fundamentally broken, and keep what works.  A successful secondaryrnmortgage market must produce a more stable and competitive system for ALLrnlenders, all institutions, regardless of shape or size. And, to avoid marketrndisruption, any new proposal must be carefully phased in.</p

Stevens said he had beenrnan independent mortgage banker and had worked at a GSE so he knew about therncompetitive inequity created by uneven pricing and credit policies and hernwitnessed firsthand the flawed incentive structures that drove GSEs towardrnmarket share competition that ultimately hurt community-based lenders.  </p

He pointed to onernexample, risk share which, with its current back-end structure only benefitsrnthe GSEs.  “Risk sharing options shouldrnbe made available to lenders at the “point of sale,” with offsetting g-feernreductions rather than only at the back end when loans are already on the GSEs’rnbalance sheets.  This is a centerpiece of MBA’s GSE transition plan.”</p

The future secondaryrnmarket system should ensure transparent pricing and access for lenders of allrnsizes.  Some examples of what the new model should deliver include thernfollowing functions:</p<ul type="disc"

  • Cash Window and Whole Loan Execution;</li
  • Multi-Lender Security Execution;</li
  • Single-Loan Securitization;</li
  • Servicing Retained Sales; and</li
  • Servicing Released Sales.</li</ul

    Stevens said thatrnWashington is full of voices but not everyone has a seat at the table.  His organization, he said, has workedrndiligently and has a sound analysis and a unique understanding of the policyrnand politics to secure that seat at the table.  “Together, with yourrnexpertise, our access in Washington and our collective resources, MBA has therncredibility and the talent to be a change agent.”  </p

    MBA intends to work on arnnumber of fronts to promote a housing finance system in which the independentrnmortgage banker can thrive.  Key priorities in 2014 include:</p<ul type="disc"

  • Ensuring any final GSE reforms provide equal andrn competitive access for all lenders and existing practices are morern responsive to small lenders;</li
  • Working to create a clear set of representations andrn warranties that protect lenders from repurchasing loans with a minor andrn non-material defect;</li
  • Protecting the FHA program from overreaching reformsrn that could undermine its historical mission;</li
  • Executing on SAFE Act reforms that will allow lendersrn to compete for talented loan officers and ensure consumers, no matter wherern they shop for mortgages, their loan officer has been properly educated andrn tested.</li</ul

    The industry must stayrntogether, Stevens concluded.  It must “speakrnas one – with one loud voice advocating for the American dream.”

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  • About the Author

    devteam

    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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