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

The Mortgage Bankers Association (MBA) called on policymakers in Washington today to create a new position to coordinate housing policy; what MBA President and CEO David H. Stevens, called "a traffic cop for all new rules" to ensure that the flood of new regulations complement one another rather than conflict.  Stevens proposed this in remarks prepared for delivery at the association's 99^th Annual Convention and Expo now happening in Chicago.

Stevens, who was until a year and a half ago Commissioner of the Federal Housing Administration, also called for greater transparency in rulemaking and took a big swipe at the Federal Housing Finance Agency (FHFA) and its actions as conservator of Freddie Mac and Fannie Mae, the two government sponsored enterprises (GSEs).

Stevens said that housing opportunity is under attack, partly because policymakers do not understand how complex it really is nor do they know how desperately they need the expertise of those who work in the industry.  He outlined some specific problems:

• The Consumer Financial Protection Bureau (CFPB) has six different major rulemaking efforts all slated to take effect early next year. That's a huge regulatory compliance burden to absorb--all at once--in a highly automated business.
• The CFPB is embarking on new audits of non-bank mortgage on top of requirements being imposed by 50 states, the OCC, HUD and others. It seems, he said, impossible for them to just agree on one set of audit rules. Some small lenders may decide to close up shop rather than worry about complying or finding the resources to do so. That means fewer lenders out there.
• The Fed is delivering the best housing recovery medicine possible---record low interest rates but aggressive buyback demands from the GSEs, compare ratio pressure from FHA, intense examiner scrutiny of lender decisions, risk of false claims, and more are driving excessive underwriting caution and blunting the positive effect of rates.

Stevens said he is not talking about revving up an industry built on irresponsible lending which would hurt those within the industry as much as outside of it.  "We must be vigilant to never again let others -- motivated purely by greed -- hijack our proud and honorable industry."  But there is middle ground, he said.  And rebuilding the business around countless rules and restrictions that would choke off business for all but the overqualified is not the way. 

The market is starting to heal, but if a bunch of new rules hostile to home buying start to crush the recovery next year it is hard to see how the market gets back on its feet.  And if the modest home price gains we have built so far begin to retreat--we will all be in trouble.  Borrowers will go back underwater increasing risks to homeowners. 

The answer, he said, lies in regulatory transparency and coordination.

The new "traffic cop" he is calling for, Stevens said, wouldn't have the authority to tell regulators not to do their job, but to identify points of conflict, try to balance timing and impact on markets, and push regulators to communicate with each other.  The office would be charged with bringing a rationale, integrated approach to housing policy change management.  And it would have a clear and absolute mandate to identify and evaluate downstream effects and unintended consequences of all changes to government housing policy.  .  "It might not reduce the number of masters we serve," Stevens said, "but it would at least make them talk to one another."

And just like consumers need more transparency, Stevens said, so do mortgage lenders before regulators hamstring the industry with potentially unworkable rules that harm consumers.   One of the cornerstones of the CFPB is to bring better transparency to borrowers because that will result in better decisions by borrowers "So let's give us the same deal-because better transparency equals better outcomes all the way around - for consumers and for better housing policy."

And, Stevens added, "How about making the Federal Housing Finance Agency-FHFA-comply with public notice and comment rules before the GSEs impose critical new rules on our industry"   He noted that the GSE's have played and continued to play a critical role in housing and "until their future is defined, we are locked into a state of mutual dependency."  

But even thought the GSE's are government sponsored and regulated, Stevens said, they set rules without following the process required of other government agencies.  "That means they can rock our world without notice or comment.  In fact, they can change the game without abiding by any formal regulatory process.' 

He pointed to several recent major announcements of policy changes from the GSEs that were done without public review and comment including changes to net worth requirements, g-fee changes, volume limits for some existing sellers, new servicing rules, a new framework for reps and warrants, and changes to the GSE securitization platform.

"At MBA," Stevens said, "we think it's time for this to change.  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."

He said the coming year is critical and if MBA allows things like the Qualified Mortgage to become an unqualified disaster, it's not just the U.S. consumer that will be hurt.  It's the whole U.S. economy.   It needs a boost from a reviving housing market; and interest rates are in a place to allow it to happen.  "But if we let the collective body of regulators, Congress and agencies in Washington continue to depress the recovery with uncoordinated and counterproductive policies, then housing will continue to be a drag on the economy."

He issued a rallying cry to the membership to get involved.  "There is one point we really need to drive home.  And it's this: We don't need to be sent off in the corner to be punished while others fix the housing market.  We need to be part of the solution.