MBA's Stevens Calls for a "Traffic Cop" to Manage Flood of New Regulations

by devteam October 23rd, 2012 | Share

The Mortgage Bankers Association (MBA)rncalled on policymakers in Washington today to create a new position torncoordinate housing policy; what MBA President and CEO David H. Stevens, called “arntraffic cop for all new rules” to ensure that the flood of new regulations complementrnone another rather than conflict. rnStevens proposed this in remarks prepared for delivery at thernassociation’s 99th Annual Convention and Expo now happening inrnChicago.</p

Stevens, who was until a year and a halfrnago Commissioner of the Federal Housing Administration, also called for greaterrntransparency in rulemaking and took a big swipe at the Federal Housing FinancernAgency (FHFA) and its actions as conservator of Freddie Mac and Fannie Mae, therntwo government sponsored enterprises (GSEs).</p

Stevens said that housing opportunity isrnunder attack, partly because policymakers do not understand how complex itrnreally is nor do they know how desperately they need the expertise of those whornwork in the industry.  He outlined somernspecific problems:</p<ul class="unIndentedList"<liThe Consumer Financial Protection Bureau (CFPB) has six differentrnmajor rulemaking efforts all slated to take effect early next year. That's arnhuge regulatory compliance burden to absorb–all at once–in a highly automatedrnbusiness.</li<liThe CFPB is embarking on new audits of non-bank mortgage on top ofrnrequirements being imposed by 50 states, the OCC, HUD and others. It seems, he said, impossible for them to justrnagree on one set of audit rules. Some small lenders may decide to close up shoprnrather than worry about complying or finding the resources to do so. That meansrnfewer lenders out there.</li<liThe Fed is delivering the best housing recovery medicinernpossible—record low interest rates but aggressive buyback demands from thernGSEs, compare ratio pressure from FHA, intense examiner scrutiny of lenderrndecisions, risk of false claims, and more are driving excessive underwritingrncaution and blunting the positive effect of rates. </li</ul

Stevensrnsaid he is not talking about revving up an industry built on irresponsiblernlending which would hurt those within the industry as much as outside ofrnit.  “We must be vigilant to never againrnlet others — motivated purely by greed — hijack our proud and honorablernindustry.”  But there is middle ground,rnhe said.  And rebuilding the businessrnaround countless rules and restrictions that would choke off business for allrnbut the overqualified is not the way. </p

Thernmarket is starting to heal, but if a bunch of new rules hostile to home buyingrnstart to crush the recovery next year it is hard to see how the market getsrnback on its feet.  And if the modest homernprice gains we have built so far begin to retreat–we will all be inrntrouble.  Borrowers will go back underwater increasing risks tornhomeowners. </p

Thernanswer, he said, lies in regulatory transparency and coordination.</p

The new “trafficrncop” he is calling for, Stevens said, wouldn’t have the authority to tell regulatorsrnnot to do their job, but to identify points of conflict, try to balance timingrnand impact on markets, and push regulators to communicate with each other.  The office would be charged with bringing arnrationale, integrated approach to housing policy change management.  Andrnit would have a clear and absolute mandate to identify and evaluate downstreamrneffects and unintended consequences of all changes to government housingrnpolicy.  .  “It might not reduce the number of masters wernserve,” Stevens said, “but it would at least make them talk to one another.”</p

And justrnlike consumers need more transparency, Stevens said, so do mortgage lendersrnbefore regulators hamstring the industry with potentially unworkable rules thatrnharm consumers.   One of therncornerstones of the CFPB is to bring better transparency to borrowers becausernthat will result in better decisions by borrowers “So let’s give us the samerndeal-because better transparency equals better outcomes all the way around -rnfor consumers and for better housing policy.”</p

And,rnStevens added, “How about making the Federal Housing Finance Agency-FHFA-complyrnwith public notice and comment rules before the GSEs impose critical new rulesrnon our industry”   He noted that the GSE’srnhave played and continued to play a critical role in housing and “until theirrnfuture is defined, we are locked into a state of mutual dependency.”  </p

But evenrnthought the GSE’s are government sponsored and regulated, Stevens said, theyrnset rules without following the process required of other governmentrnagencies.  “That means they can rock ourrnworld without notice or comment.  In fact, they can change the gamernwithout abiding by any formal regulatory process.’ </p

Hernpointed to several recent major announcements of policy changes from the GSEsrnthat were done without public review and comment including changes to net worthrnrequirements, g-fee changes, volume limits for some existing sellers, newrnservicing rules, a new framework for reps and warrants, and changes to the GSErnsecuritization platform. </p

“At MBA,”rnStevens said, “we think it’s time for this to change.  We must demand thernopportunity to have input on any rules the GSEs are considering–before theyrnare set in stone.  This is only reasonable–and MBA is going to fight forrnit.”</p

He saidrnthe coming year is critical and if MBA allows things like the QualifiedrnMortgage to become an unqualified disaster, it’s not just the U.S. consumerrnthat will be hurt.  It’s the whole U.S. economy.   It needs a boost from a reviving housingrnmarket; and interest rates are in a place to allow it to happen.  “But if we let the collective body ofrnregulators, Congress and agencies in Washington continue to depress thernrecovery with uncoordinated and counterproductive policies, then housing willrncontinue to be a drag on the economy.”</p

He issuedrna rallying cry to the membership to get involved.  “There is one point we really need to drivernhome.  And it’s this: We don’t need to be sent off in the corner to bernpunished while others fix the housing market.  We need to be part of thernsolution.

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About the Author


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

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