| Mortgage Bankers Association Chief Executive Officer David H. Stevens sat down with Mortgage Daily at the trade group’s annual conference this week in Chicago to talk about qualified mortgages, agency representations and warranties, and real estate appraisals. He also took an aggressive posture with convention attendees about the impact that the industry should strive to have in the development of regulations.
“The next few months really are going to set the roadmap for what housing finance and really homeownership looks like for not just the next year but decades to come,” Stevens said. “So the real question is … ‘what happens with this large number of rulemakings that’s all set to roll out in first quarter.’ We have seven major rulemakings that are coming that should be finalized by … yearend or early first quarter.” Impacted from the upcoming rulemakings are servicing, high-cost loans and ‘qualified mortgages.’ In addition, implementation of the Dodd-Frank is imminent. Stevens noted that while the safe harbor provision of the qualified mortgage is needed to avoid constraining the housing market, what is first most important is getting the QM definition down and clarifying ability to pay. The broader and clearer the definition is, the more the homeownership market will benefit. Policymakers — including Department of Housing and Urban Development Secretary Shaun Donovan, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke — have all publicly stated that anything that tightens credit further is bad for housing.
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sketch of David Stevens by Stephen McConnell
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“I’m hoping that the policymakers take both sides,” he stated. “At the end of the day we’re going to have … very high credit quality loans in the QM, regardless … Hopefully it reflects certain type of lending we’re doing right now — which some could argue is too tight anyway.”
On the upcoming changes to Fannie Mae’s and Freddie Mac’s representations and warranties, Stevens said too little it known about the changes to determine the impact. For instance, it isn’t clear exactly what “misstatement” means, leaving interpretation open and repurchase liability unknown.
Until these type of issues are clarified, lenders will be cautious.
One problem is that Fannie and Freddie, which would have failed without government support, aren’t subject to the rulemaking process, leaving the determination of the policies in the hands of two failed companies.
“Consider some of the recent major announcements of planned policy changes from the GSEs — all done without public review and comment,” Stevens said in prepared comments for a speech given on Monday at the event. “They include changes to the minimum net worth requirements, arbitrary g-fee changes, volume limits for some existing sellers, new servicing rules, a new framework for reps and warrants, and changes to their securitization platform”
The former Federal Housing Commissioner acknowledged the difficulty in appraisal values keeping up with rising sales prices as appraisers compensate for past deficiencies and remain overly cautious. He noted recent comparable sales are very important, especially in the lower-end market where the is little margin for error due to higher loan-to-value ratios.
Stevens highlighted how various housing groups have voiced concern over not reflecting the right value of the home, failing to reflect market stabilization and the use of foreclosures as comparable properties.
He noted that housing opportunity is under attack. He pointed to litigation risks, regulation and agency policies that are forcing housing opportunity into retreat.
Stevens painted a picture of an industry that was in worse shape a year ago than it is now.
“Back then we were reeling from the blows to our reputation; dealing with the near destruction of our industry and a wake of turmoil to homeowners across the country. Fannie and Freddie were still hurting badly,” he said in the prepared statement. “Dodd-Frank was in our future — with its thousands of pages of new rules — yet it wasn’t in our immediate future like it is today.”
The MBA chief called today’s policymaking dysfunctional. Other problems include multiple rulemakings from the Consumer Financial Protection Bureau, which is a “huge” compliance burden for lenders to absorb; new CFPB audits for non-bank lenders; and requirements by states, federal banking regulators and HUD.
In addition, HUD’s disparate impact rule and the QM’s ability-to-repay rule appear to be “a case of where one rule the federal government is promoting could produce an outcome that the federal government will be punishing,” leaving lenders in a no-win situation.
So Stevens proposes the coordination of housing policy through a “traffic cop” for all new rules — a liaison who ensures regulations compliment one another rather than conflict and that regulators communicate with each other.
He also emphasized that the mortgage industry needs to be involved in the development of regulation.
“At MBA, we think it’s time for this to change,” Steven said. “We must demand the opportunity to have input on any rules the GSEs are considering–before they are set in stone. This is only reasonable — and MBA is going to fight for it.”
