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

David H. Stevens, President and CEO of the Mortgage Bankers Association criticized the federal government and financial regulators as providing a lack of transparency and an overly burdensome regulatory atmosphere in remarks prepared for delivery at MBA's inaugural Independent Mortgage Bankers Conference.

Stevens credited the federal government with driving much of independent bankers' recent successes with programs such as QE3, Operation Twist and HARP but also enumerated the burdens the independent bankers are carrying and asked "How can you keep running a business let alone grow your business in this atmosphere?" 

Right now the potential is there for a very bright future for the industry; interest rates are a record lows, home prices are stabilizing, consumer sentiment is rising, and the affordability index is near its peak.  There is also the huge Echo Boom generation are nearing the peak age to buy homes and raise families, but "All of this is at risk with the 'perfect storm' of federal regulations that also lie ahead.". 

When government regulates pervasively it creates more risk for repurchasing and litigation and tilt the scales toward larger institutions that have resources to manage these risks.  "There must be a competitive mortgage marketplace where all have the opportunity for growth and policymakers must be aware of the impact of the litany of rules and regulations causing confusion in our industry and the mortgage marketplace."

Stevens conceded that some of the proposed changes were needed and even necessary to ensure the mistakes of the past never happen again but that the pendulum has swung too far.  In a recent six-week period he said MBA had to respond to six rulemakings covering things such as RESPA/TILA disclosures, servicing standards, appraisal disclosures and the association is still heavily engaged in some 3,000 pages of rulemaking generated by Dodd-Frank not to mention issues related to FHA reform, Basel III capital rules, and Risk Retention/QRM rules from six regulators.  It is also working on issues related to the future of Freddie Mac and Fannie Mae. 

He called again for the White House to create a role for housing policy coordination-a traffic cop for all new rules.  This office would not make new rules, but rather would ensure that ongoing regulations complement not conflict with each other. It wouldn't have authority to tell regulators not to do their job, but to identify points of conflict and try to balance timing and impact on markets while bringing a rational, integrated approach to housing policy change management.   It is time, Stevens said, "for Washington to stop thinking of our industry as a problem they need to fix. Because, frankly----their fixes are often a big part of the problem."

Washington often appears dysfunctional when it comes to policy making including housing policy Stevens said.  There are 9 different regulators plus Congress engaged in reforming the mortgage business and they aren't working together.  The answer lies in regulatory transparency and coordination. Just like consumers need more transparency-so do we-before regulators hamstring our operations with potentially unworkable rules that harm consumers.  (GAO: 160 Entities Involved in Housing Assistance)

Stevens also criticized Fannie Mae and Freddie Mac who he said now carry almost two thirds of the single family housing market and "have the ability to rock our world with a single policy change."   They need to start making clear, detailed, fully-baked presentations of planned policy changes of significance in advance.  "Our market is fragile, and the stakes are too high to allow these two companies to continue to throw change after change at lenders, with no avenue for input in the formative stages".

Stevens was especially dismissive of the SAFE Act saying it does little to provide assurances to consumers that their loan officer meets minimum qualification and testing standards. At the same time, it saddles independent mortgage bankers with the costs of licensing and the inability to compete fairly in the labor market for talented loan originators. It is unfair, he said, and MBA aims to change it.  It won't be easy, and it will take time, "But we are committed to the objective of securing uniform, federal qualifications and testing standards for all loan originators, regardless of whom they work for."

Stevens concluded by saying the bottom line is that coordination across regulators and transparency in rule making is an absolute necessity.  "It's mandatory to ensure a safe and balanced recovery of the housing finance system.  By doing this, we can restore a competitive marketplace for the success of your business, for the growth of our industry, for the health of the economy and most of all, for the confidence of consumers."