Remarks by David Stevens, MBA President and CEO, During MBA's 102nd Annual Convention & Expo

Rob Van Raaphorst
(202) 557- 2799

SAN DIEGO, CA (October 19, 2015) - David Stevens, President and CEO of the Mortgage Bankers Association (MBA), today delivered the following remarks at the association's 102nd Annual Convention and Expo in San Diego, CA. 

[Please Note:  These are prepared remarks.  Mr. Stevens may add to or subtract from these remarks during the course of his presentation.  Portions of the text may be omitted during the speech.] 

Thank you, Bill. Good morning and welcome to MBA's Annual Convention in sunny San Diego. 

I'd like to thank Bill Cosgrove for his tremendous service to MBA, our members and the entire real estate finance industry.  He's a warrior.  He has been unwavering in his support for MBA and advocating for this industry. He's dedicated to and passionate about this business.  It's been a pleasure working with him.  Thank you, Bill. 

Congratulations to Bill Emerson, MBA's 2016 Chairman, on his election.  Bill brings incredible energy, talent and focus to the leadership ranks and I look forward to continuing our working relationship over the next year.  

As the country prepares for its own leadership change with the next Presidential election, the polls tell us a lot about the temperature of the country and the appetite Americans have for the status quo in Washington.  

Just take a look at the political composition of the candidates and their favorability ratings.  Americans want something different.  They want the country to move in a different direction.  Donald Trump, Ben Carson, Carly Fiorina top the group of Republican Party candidates; none of whom have ever held a political office in their life.  Within the Democratic Party ranks, Bernie Sanders, while a career politician, gains ground against Hillary Clinton - a known entity who bears the name of one of the most beloved Presidents of our time.   

The anti-establishment mindset that echoes throughout the country is undeniable.  It continues to be a resounding theme.  Voters want to move this country forward, but they want to do it in a different way. 

Likewise, our community of real estate finance professionals is eager to turn the page and move forward.  And yet, despite, or maybe because of, the tidal wave of new regulations and countless changes to rules already in place, the market is not progressing as well as it could be in bringing housing back as the engine of our economy. 

But if you take a closer look, if you look past the frustration, you will see that we have actually accomplished a lot.  It may not feel like things are "back to normal", but we all know that the business will never be like it was before.  There is this new normal, the post crisis "normal" where every step we take, every loan we make, will be scrutinized closer than ever.  It is through that lens that we should look at what we have accomplished together.  

Your ability to absorb all this change and rally this industry to recovery has been remarkable.  No other industry has experienced this kind of dramatic shift in the way they do business.  We've proven that the real estate finance industry can change and adapt to do whatever is necessary to contribute to a safe, affordable marketplace.  

As an industry, we help communities grow by financing the homes for America's families, and we build a path to homeownership for families when they are ready to take that step.  

However, in the conventional conforming market that serves many of those new homeowners, we still remain completely dependent on government guaranteed programs - FHA, VA, USDA, Freddie Mac and Fannie Mae.  

Fannie Mae and Freddie Mac play a vital role in the health and stability of the entire real estate finance market.  We've developed a great partnership between the industry, FHFA and the GSEs.  We've had specific improvements on securing representation and warranty clarity as well compensatory fee modifications with the GSEs, including life of loan exclusions and timeline requirements.  And, we are aligned with FHFA's work around the Single Security and the Common Securitization Platform. 

But the fact remains that the secondary market is still fragile and we could be just one market drop away from GSE legislation in a crisis environment. We need to avoid that at all costs.  

Together, FHFA and MBA have supported efforts to create more competition and protect taxpayer investments.  We must advocate for a future state that would allow Fannie Mae and Freddie Mac to provide liquidity in the market, but also ensure we don't repeat the sins of the past.  We have spoken to FHFA and the GSEs about the importance of risk sharing - specifically the need for upfront risk sharing so all lenders - big and small - can be active participants in the program.  In fact, it's a concrete way to de-risk taxpayers.  

I have to be honest. We are worried about the risk share programs being used today.  It's the single biggest issue I'm hearing from our members right now.  There are two forms of risk share deals -- back end and upfront.  Back end risk share has raised many concerns among market analysts, including ours at MBA.  These deals are not transparent and do next to nothing to help the borrower, since the loan has already been originated.  

Here's the problem - upfront risk share transactions are only being offered to a handful of institutions, leaving thousands of medium and small lenders out in the cold. We've seen this movie before, and it does not have a happy ending.  

This is why we've consistently promoted upfront risk share that works for all.  It's also why we've included mortgage insurance and recourse as part of our proposed risk share structure.  It brings more competition to the market, could lower costs to consumers, and allows all lenders to participate on an equal, level playing field.  

Look, with all the great work we've done together between the industry, Fannie Mae, Freddie Mac and FHFA, we cannot afford to drop the ball now.  We cannot allow a core component of the real estate finance system - risk sharing - to be implemented in a fashion that cuts out the vast majority of lenders and returns the market to dangerous footing.   

And whether we're talking about the GSEs or the thousands of pages of housing regulations, we talk about it the context of providing a safe, reliable and affordable pathway for housing.  However, some of the actions being taken today are forcing lenders into a very restrictive and defensive lending posture.  Whether we're talking enforcement regimes or confusion in some of the rules, today's credit restraints did not come out of thin air. 

We now live in a world where the Department of Justice (DOJ) is using the False Claims Act in a way that has never been used before.  Let's just think about this for a moment.  Congress enacted the Federal False Claims Act during the Civil War to combat fraud against the federal government by suppliers to the Union Army.  And now DOJ is using it to apply treble damages against lenders for originating an FHA loan with even the most minor of errors.  And people wonder why lenders are lending defensively? 

As long as the current public policy environment and public discourse continues, it only perpetuates the lack of trust in the financial services system.  We're going to be stuck in an environment where the very same families some advocates care about most will be the ones blocked from that opportunity.  

So let's be clear and allow me to set the record straight on a few items. 

First, lenders want to lend.  There are some critics that believe that lenders are somehow holding borrowers and real estate market hostage.  The enforcement risk today exceeds any lender's ability to make sound common sense business decisions in the interest of consumers.  It's as if we have one foot on the accelerator and one foot on the brake at all times.  

Secretary Castro has declared that HUD is the department of opportunity.  Administration officials are encouraging consumers to buy homes, and we've had some success in making credit available through MIP reductions and returning responsible 97 percent loan-to-value lending.  But then here come the brakes with the DOJ changing the game using the False Claims Act and treble damages.  When lenders begin pulling out of the FHA market due to the enforcement environment, we are concerned about the future viability of the program and those that will be hurt the most are first-time and underserved buyers. 

Second, we support clear regulation.  We are not against it.  However, when everybody is too busy regulating, nobody is focused on the overall outcome and unintended consequences on consumers and the marketplace.  Multiple, duplicative or confusing rules do not always make for a better, easier or safer lending environment.  Getting the rules RIGHT with clarity creates the best environment and will lead to effective and functional consumer protection. 

And finally, no matter how big or how small, you are regulated.  Whether you are a bank, non-bank; large or small; you're all regulated.  Let's lift the veil of conspiracy and set the record straight.  EVERYONE is being regulated regardless of business model or size.  We need to stop the finger pointing that ultimately attacks every business model for different reasons. If we keep on this path, there will be no lenders to serve the housing market. We all support America's housing through a diverse set of lenders, large and small, bank and non-bank, all who operate under the safety net of strong oversight.

The bottom line is this - regulators and legislators at all levels must recognize that we are operating today in the safest lending environment in history.  As I've said many times, leaders in Washington should be taking a victory lap for creating a process that is safer and more transparent for consumers.  Continuing to focus on the past, will not allow our housing economy to move forward. The country wants to move forward.  Borrowers want to borrow and lenders want to lend.  We need to get the balance back between enforcement and encouragement.

We need to change the tone and usher in a dialogue of confidence.  Washington leaders must understand their role in helping the market recover.  It requires a cultural shift in the mindset and rhetoric of regulators and enforcement officials.  They should use any public remarks to promote trust in the real estate finance process, not the opposite.  I'm hopeful you'll hear some good things from the regulators this morning.

We need to shine an aggressive spotlight on abusive enforcement.  And not just for the rest of this administration, but for the next administration as well.  Lenders are living in a "gotcha" environment where enforcement replaces clear regulatory policy and it is hurting your efforts to serve America's communities. 

We will continue advocacy efforts with legislation still on Capitol Hill to include everything from QM modifications, freezing the proposed rule on Federal Home Loan Bank Membership, points and fees, transitional licensing, stopping efforts to use G-Fees as pay for efforts, and more.

We have to fight to establish clear rules of the road for lenders.  Uncertainty remains in the lending community, whether it is the proposed FHA Loan Certification rule or the recently released guidance on Marketing Service Agreements by the CFPB.  These are just two examples of ambiguous rules that unnecessarily expose you to excessive enforcement risk. 

Finally, we will remain steadfast, insisting that the rules create a balanced lending environment for qualified borrowers; an environment that's safe and affordable.  We've worked through modifications of many rules, and we will keep pushing. 

Over the past four years, the real estate finance industry has been presented with more than 5,000 pages of new rules, guidance and commentary.  We can easily get lost in the drama of political posturing, media headlines, and change management to comply with regulatory deadlines. What truly gets lost in the enormity of your work is the significant changes and accomplishments we've achieved to create today's safe lending environment and vibrant industry.  Have there been some inadvertent bumps in the road?  Sure.  With massive change, it's to be expected.   But our industry has more than met the challenge.

We have accomplished a lot, which occurred explicitly because we stuck together as one industry and committed to being engaged as one voice.  And as one voice, we successfully: 

  • Secured a safe harbor in the Ability to Repay/Qualified Mortgage rule.  When we started, everyone said the odds were against us and a safe harbor wasn't possible, any many fought us on this, but we persisted, stayed in the game and got it done. 
  • Procured a "right to cure" mechanism under the ATR rule so that lenders now have the ability to fix a problem rather than face immediate punitive action. 
  • Achieved alignment of the Qualified Residential Mortgage exception from risk retention with the CFPB's "QM = QRM" definition under the rule.  This alignment could be an important step in rebuilding the private label mortgage backed securities market in the years ahead. 
  • In the final risk retention rule we eliminated other provisions such as the 20 percent down payment requirement, the maximum front- and back-end debt-to-income ratios, and the Premium Capture Cash Reserve Account (PCCRA). 
  • Stopped an effort to require that all loan officers be compensated only by a flat origination fee.
  • Convinced regulators to leave the existing risk-based standard for residential mortgage loans in the Basel rule, allowing all institutions to remain competitive in the marketplace.  

These are just a few of our regulatory successes.  We continue pressing for regulatory relief for all segments of our industry on Capitol Hill as well.  Already this year, we've passed legislation raising the QM cap on points and fees through the House and have seen bipartisan bills introduced in Congress to allow loan originators to obtain transitional licenses.  We've been able to stop the ability for eminent domain loans to be financed with the FHA and so far we have blocked the use of g-fees for efforts outside of housing.  

We have successfully secured the passage of legislation that extends important tax provisions like MI premium deductibility, mortgage debt forgiveness and Low Income Housing Tax Credits.   We ensured FHA did not add new administrative fees on lenders.  We've also secured sufficient FHA multifamily commitment authority in the HUD Appropriations process.  And MBA worked with a broad industry coalition toward the successful reauthorization of the Terrorism Risk Insurance Act. 

And finally, we've had some real progress working in in the states.

MBA, working alongside our state association partners, has seen adoption of the Uniform State Test for mortgage loan originators by 50 state regulators in 43 states.  MBA's partnership with states continues to focus on a variety of efforts including HOA Lien priority, eminent domain, duplicative and potentially costly state servicing bills, and other loan officer licensing laws.

What concerns me most, are the efforts trying to divide us.  Many in Washington, some who are regulators, others that claim to represent factions of our industry, are purposefully trying to divide us to serve their own self interests.  MBA represents the whole industry.  We represent every business model and advocate for all.  I talk to our members daily and I can assure you that threats exist to EVERY business model here in this room, not just the ones in the headlines.   If you think a rule is in your favor, trust me, there is another one out there that is not.  What has made us effective is our unity and our power from staying together. Divided, we will fail and our voice will be muted.

The facts are clear, when we work together, we really can get things done in Washington and throughout the country.  Sometimes it feels as if we're refining and refining with no real progress. But we have made real progress and we will continue to do so as long as we remain collectively organized.

We're sitting on the cusp of the best period of growth and demand for housing that our industry has seen in over a decade.  The study we released last month is exciting. Over the next ten years, the U.S. will gain between 13.9 and 15.9 million additional households. 

The next generation has arrived; they are bigger than the Baby Boomers; and they all need somewhere to live.  Some will rent and some will own.  Should homeownership rates revert back to a healthy, long-term averages - not the historical lows we have today, nor the over-inflated rates of 2005 - Millennials could boost homeownership by 4.3 million households. 

This is why we've been so vocal about the need for regulatory clarity.  It is so we can serve this next generation to the best of our ability.  It is why we said from the very beginning, that we need clarity in the rules to achieve the proper balance between consumer protections and access to credit. 

You have tirelessly worked to operationalize the tidal wave of changes that have swept this industry.  And this is about so much more than complying with new regulations.  It's about serving consumers and communities.  It's about families and providing them a home.

What can MBA, do?  While you continue focusing on this next decade of extraordinary market opportunity and help consumers get a piece of the American Dream, MBA's role will be to keep fighting the fight and to ensure your growth and success is without unpredictable, excessive regulatory and enforcement impediments.

And we will be there for you, providing member services that help you run a successful business.  That means education and training programs designed to help you survive and thrive in today's new regulatory environment.  It means entry level programs like Mortgage Banking Bound, created to attract a new diverse workforce to support our industry.  To be your resource to research products, data, and industry trends that can help you understand where the market is headed today, next month and next decade.  It's to provide you the information you need to set the course for your business.   And, it means creating partnerships that can offer benefits for your business.  In May, we announced our partnership with Fannie Mae and today I am pleased to announce we have new member benefits through a partnership with Freddie Mac.  

MBA has grown significantly over the past four years.  We have never been bigger, stronger, or louder.  Our membership base has never been more engaged and active advocating for our industry.  

We truly bring one loud voice to the issues that matter.

We have one vision for the future of our industry

And that makes us the one resource for getting things done, not just for our businesses, but also for our customers.

We need to continue this momentum.  We must continue pushing forward.  And we need activism at every level of your business.  Your staff will have an opportunity this April when we charge Capitol Hill during MBA's National Advocacy Conference.  Be part of the process.

I will close with this:   

The country is ready to move forward.  Consumers want to be free to live in the homes they choose and can sustainably afford.  The real estate finance community wants to help them realize those goals.  We're committed.  We're ready. 

Interest rates remain at near historic lows and with more consumers ready to buy, there's tremendous opportunity on the horizon.  We're on the brink of a robust housing future, but it will be a missed opportunity if we don't stop looking back and start moving forward. 

We need our policymakers to join us and turn the page.

We want you to be free to focus on this incredible decade of opportunity that's ahead.  Let's clarify or fix the rules to create a clear, reliable system where lenders understand the rules of the road, but can still provide value and service to their customer.  Let's change the cultural mindset to look ahead at the opportunity before us and help American families obtain the homes they want and need. 

It's time to move on from the past, live in the present, and build hopes for the future. 

Thank you.