MBA's Stevens: No Sense Pining for the way it used to be

David Stevens, Presidentrnof the Mortgage Bankers Association (MBA), told an audience attending the association’srns annual convention in Las Vegas that the rules for Qualified ResidentialrnMortgages will be, as rumored, released on Wednesday. This rule, which was sentrnback to the drawing board two years ago after housing stakeholders complainedrnit would shut down mortgage lending will, in this iteration, he said be alignedrnwith the Qualified Mortgage Rule and will not have steep downpayment or strictrndebt-to-income requirements.  He creditedrnthe industry and consumer groups for advocating on the issue.   </p

Stevens pointed to otherrnaccomplishments MBA and other industry groups have made over the past year butrnsaid there is still a lot wrong with housing. rnMany people seem to have forgotten that housing is good for therneconomy.  Homeownership helps families,rncommunities, and the economy but today it is being publicly devalued.  At the same time housing is being pulledrnalong by the economic recovery rather than fulfilling its historic role ofrndoing the pulling</p

Homeownership, he said,rnremains the single best idea for building family wealth and growing the middlernglass; housing wealth is far more broadly distributed than that from the stockrnmarket and so when the housing industry argues for better access to credit it’srnnot an argument for the interests of the industry, it is sound policy advocacyrnfor family, national and local economies, and for a stronger middle class.</p

But that access isn’t getting any easier.  Originations are declining and aversion tornrisk is a big reason why.  Lenders arernincreasing requirements for credit scores, builders are building fewerrnlower-priced homes because of concern about that market.  There is change taking place throughout thernsystem.  Minorities and women are makingrnup a growing portion of potential borrowers he said, and this “will likelyrncause stress to the square peg/square hole underwriting mentality.”  And further he asks, “Isn’t tight credit ourrnown fault?”</p

MBA’s figures show thatrncredit availability is about one quarter of what it is in a more typical yearrnand credit overlays are one key factor. rnWhile FHA allows scores as low as 580, lenders feel it is too risky andrncredit scores below 640 have been virtually eliminated from the industry. Byrncontrast, credit standards are easing for high income and wealthierrnborrowers.  The result is a mortgage market that can be summarized as “Strengthrnat the top, weakness at the bottom.”</p

The recent HMDA datarnreport confirms that regulation-induced credit overlays are making creditrnharder to get for the very borrowers the rules were intended to protect.  “Asrna result, we’re seeing a clear opportunity gap.  Mortgage credit is mostrnavailable to those who need it least.  Thisrnis not right, not tolerable, and not good for families or the economy. rnWe’ve got to bridge this divide.”<br /<br /And it can’t be done by continuing to bash the failings of the past, it’s timernto change the dialogue and no one, he said, is better positioned to do thisrnthan the Obama Administration.  “It’s time to acknowledge all thernsafeguards added to mortgage lending.  It’s time to start talking aboutrnhousing finance like the beneficial activity that it is.  It’s time to letrnpeople know it’s OK to start trusting the system again.  Most of all, it’srntime to change the dialogue of distrust to a dialogue of confidence.”</p

Stevens said lenders want to lend more but while they are worried about decliningrnvolume they are even more worried by an uncertain, confusing and intimidatingrnregulatory and enforcement environment.  Regulators need to hold lendersrnaccountable for egregious behavior, he said, but they also have to creaternbetter clarity for lenders on what they will be held accountable for down thernroad.  Three factors are at play:  Unclear rules; “zero-tolerance”rnapproaches to enforcement; and conflicting, duplicative regulatory incentives.  “It ultimately piles on so deeply that nobodyrnwants to take any risk,” he said.  <br /<br /There are some things MBA members can do to change the dialogue and some thingsrnthat will not change, Stevens said, first suggesting that members work to makernFHFA Director Watt “wildly successful” as many of the things on his agenda arernon MBA’s as well.  It is also time tornmodify key rules, leverage HUD Secretary Castro’s good start on improvingrnaccess to credit; work with the Consumer Financial Protection Bureau to modifyrnrules to ensure the enforcement actions are the exception not the rule.  No single remedy is a silver bullet, he said,rnbut each problem that gets fixed could help tens of thousands of creditworthyrnborrowers qualify for a loan.</p

And among those thingsrnthat will not change is the expense of running a mortgage lending business, butrnworking with regulators to reduce uncertainty and risk will improvernsustainability and give more stability and confidence to the industry.  Mortgage lending is going to be a smallerrnindustry of professionals who have the expertise to manage the increasingrncomplexity; the fly-by-night operators are gone</p<pAnd, "The CFPB is here to stay.  Anyone who’s not reconciled to that factrnshould get over it.  Of course the Bureau’s not perfect – neither are we. rnBut they’re performing a necessary function with energy and they are devoted torntheir mission.  Our task is to challenge them constructively to make themrnbetter, not to automatically drag our heels.”<br /<br /The common thread, he concluded, is that it does no good to pine for things tornbe the way they used to be.  “The soonerrnwe adjust to new realities – challenging them when it makes sense – the soonerrnwe’ll bend the future our way, instead of being dragged into it kicking andrnscreaming.  Sure, venting is therapeutic.  But every breath we wasternventing is one we can spend instead to advocate sound changes.

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