'Perfect Storm' of Regulations to Hinder Restoration of Competitive Mortgage Marketplace

by devteam November 9th, 2012 | Share

David H. Stevens, President and CEO ofrnthe Mortgage Bankers Association criticized the federal government andrnfinancial regulators as providing a lack of transparency and an overlyrnburdensome regulatory atmosphere in remarks prepared for delivery at MBA’s inaugural IndependentrnMortgage Bankers Conference.</p

Stevens creditedrnthe federal government with driving much of independent bankers’ recentrnsuccesses with programs such as QE3, Operation Twist and HARP but also enumeratedrnthe burdens the independent bankers are carrying and asked “How can you keeprnrunning a business let alone grow your business in this atmosphere?”  </p

Right now thernpotential is there for a very bright future for the industry; interest ratesrnare a record lows, home prices are stabilizing, consumer sentiment is rising,rnand the affordability index is near its peak. rnThere is also the huge Echo Boom generation are nearing the peak age tornbuy homes and raise families, but “All of this is at risk with the ‘perfect storm’ of federalrnregulations that also lie ahead.”. </p

When governmentrnregulates pervasively it creates more risk for repurchasing and litigation andrntilt the scales toward larger institutions that have resources to manage thesernrisks.  “There must be a competitive mortgagernmarketplace where all have the opportunity for growth and policymakers must bernaware of the impact of the litany of rules and regulations causing confusion inrnour industry and the mortgage marketplace.”</p

Stevens conceded thatrnsome of the proposed changes were needed and even necessary to ensure thernmistakes of the past never happen again but that the pendulum has swung toornfar.  In a recent six-week period he saidrnMBA had to respond to six rulemakings covering things such as RESPA/TILArndisclosures, servicing standards, appraisal disclosures and the association isrnstill heavily engaged in some 3,000 pages of rulemaking generated by Dodd-Frankrnnot to mention issues related to FHA reform, Basel III capital rules, and RiskrnRetention/QRM rules from six regulators. rnIt is also working on issues related to the future of Freddie Mac andrnFannie Mae.  </p

He called again for thernWhite House to create a role for housing policy coordination-a traffic cop forrnall new rules.  This office would notrnmake new rules, but rather would ensure that ongoing regulations complement notrnconflict with each other. It wouldn’t have authority to tell regulators not torndo their job, but to identify points of conflict and try to balance timing andrnimpact on markets while bringing a rational, integrated approach to housingrnpolicy change management.   It is time,rnStevens said, “for Washington to stop thinking of our industry as a problemrnthey need to fix. Because, frankly—-their fixes are often a big part of thernproblem.”</p

Washington often appearsrndysfunctional when it comes to policy making including housing policy Stevensrnsaid.  There are 9 different regulators</bplus Congress engaged in reforming the mortgage business and they aren'trnworking together.  The answer lies inrnregulatory transparency and coordination. Just like consumers need morerntransparency-so do we-before regulators hamstring our operations withrnpotentially unworkable rules that harm consumers.  (GAO: 160 Entities Involved in Housing Assistance)</p

Stevens also criticizedrnFannie Mae and Freddie Mac who he said now carry almost two thirds of thernsingle family housing market and “have the ability to rock our world with arnsingle policy change.”   They need to start making clear, detailed,rnfully-baked presentations of planned policy changes of significance inrnadvance.  “Our market is fragile, and the stakes are too high to allowrnthese two companies to continue to throw change after change at lenders, withrnno avenue for input in the formative stages”.</p

Stevens was especiallyrndismissive of the SAFE Act saying it does little to provide assurances tornconsumers that their loan officer meets minimum qualification and testingrnstandards. At the same time, it saddles independent mortgage bankers with therncosts of licensing and the inability to compete fairly in the labor market forrntalented loan originators. It is unfair, he said, and MBA aims to changernit.  It won’t be easy, and it will takerntime, “But we are committed to the objective of securing uniform, federalrnqualifications and testing standards for all loan originators, regardless ofrnwhom they work for.”</p

Stevens concluded by sayingrnthe bottom line is that coordination across regulators and transparency in rulernmaking is an absolute necessity.  “It’s mandatory to ensure a safe andrnbalanced recovery of the housing finance system.  By doing this, we canrnrestore a competitive marketplace for the success of your business, for therngrowth of our industry, for the health of the economy and most of all, for thernconfidence of consumers.” 

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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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