Prepared Remarks of MBA President and CEO Bob Broeksmit, CMB, at the 2019 MBA National Secondary Market Conference & Expo
|Rob Van Raaphorst|
NEW YORK (May 20, 2019) - Bob Broeksmit, CMB, MBA President and CEO, delivered the following remarks here at MBA's 2019 National Secondary Market Conference & Expo.
[Please Note: These are prepared remarks. Mr. Broeksmit may add to or subtract from these remarks during the course of his presentation. Portions of the text may be omitted during the speech.]
It's great to be here with so many leaders in the mortgage finance world. And it's my pleasure to welcome you to the Mortgage Bankers Association's Secondary Market Conference and Expo. Thank you for joining us!
We have a great conference planned for you. Over the next two days, you'll hear from leading thinkers, starting in just a few minutes with Dr. Mohamed El-Erian. You'll also hear remarks from FHA Commissioner Brian Montgomery, Ginnie Mae Acting President Maren Kasper, and leaders from other agencies. And you'll have access to break-out sessions filled with expert analysis on the issues that matter MOST to you.
But best of all, we convinced the new FHFA Director to give one of his first major policy addresses this afternoon. After only a month on the job, MBA is pleased to hear from Director Mark Calabria.This all-star line-up reflects the respect that we at the Mortgage Bankers Association have for you. This is easily one of the most important events we host all year, and you're among the most important players in the industry, and the country.
At the MBA, we know the truth: The Secondary Market is of primary importance to millions of people.You ensure that families can get affordable mortgages, in communities large and small.You connect global sources of capital with Main Street, serving the needs of homeowners across the country.
And ultimately, you make the entire economy stronger and more dynamic, benefiting every American... whether they know it or not.
On behalf of the entire team at the Mortgage Bankers Association, I applaud you!
For my part, I respect what you do because I know what you do...Over more than 30 years in the mortgage finance industry, I've seen the Secondary Market from pretty much every angle. I've dealt with Fannie, Freddie and Ginnie. I've worked with Wall Street banks, institutional investors and ratings agencies. PLS, pass-throughs, CMOs. You name it, I know it.But I really gained respect for the Secondary Market in one of my first jobs after college. I was a young 20-something working at a company that doesn't exist anymore - Investors Residential Mortgage. I won't bore you with most of what I did, except to say that my bosses occasionally let me pitch in on our hedging and best-ex strategies.
It took me about 20 seconds before I realized... your jobs are stressful.I still get shivers thinking about it. I had to make quick decisions that involved a lot of money. The lay of the land changed every few minutes - maybe even every few seconds. My choices meant a gain or a loss of thousands of dollars at a time. Come to think of it, that's when I started to lose my hair!What I'm trying to say is that I know what you do. I understand the fast pace, the high energy, the enormous sums, and the big risks. As the President and CEO of the Mortgage Bankers Association, I can assure you that we are fighting to make your jobs easier and you more successful. When you succeed, America succeeds - and at the MBA, we are your advocates in our nation's capital!
Right now, we're working on many important issues that bear directly on the Secondary Market.One of our most important projects is the ongoing effort to improve the efficiency of the market... through the Mortgage Industry Standards Maintenance Organization.
We call MISMO the "language of lending," because it provides every part of the mortgage industry with a common platform to exchange information. Thanks to more than 20 years of hard work, MISMO standards lower the cost of working directly with other private institutions, the GSEs, and government agencies. The benefits are many and tangible.
Thanks to the volunteer efforts of hardworking people from the industry, MISMO has already delivered results... but we're aiming to make it even. Two months ago, we announced a $2 million additional investment in MISMO to support the more rapid development of key standards critical to the industry's path toward a more digital process. Among other things, this funding will help create a uniform dataset for private label mortgage-backed securities.
Everyone here will benefit from these innovations. We created MISMO to help you... and so I urge all of you to join. Get involved in helping to develop the standards and help our industry move faster, more efficiently. We want you to help us drive progress.
At MBA, we're also working directly with lawmakers and regulators to make progress in many key areas. This includes the improvements to the certifications and default taxonomy recently proposed by HUD. It's a good start, and we'll be submitting our own comments soon to suggest improvements. We also look forward to a joint policy statement from HUD and DOJ concerning when the False Claims Act is an appropriate remedy and when it isn't.
We've also achieved success on something that will greatly benefit the Secondary Market. After years of work, Freddie and Fannie will finally launch the Uniform Mortgage-Backed Security... and it will hit the market two weeks from today.
The MBA was one of the earliest advocates for this product, for good reason. Under the current system, Freddie Mac securities are less liquid than comparable securities issued by Fannie Mae, hurting investors and consumers alike. These issues will be directly addressed by the creation of a single, better product that is common to both GSEs.
The final version of the UMBS adheres to MBA's principles. When it goes live in two weeks, the result will be a deeper market that should bring greater liquidity across the board. We're excited to see it.On behalf of the industry, I would like to thank the many dedicated people at Freddie Mac, Fannie Mae, CSS, and FHFA who have worked for years behind the scenes to bring this project to fruition. I would also like to thank Craig Phillips and others at Treasury who have fully supported this effort.And while we can't spike the ball yet, we are very confident that this change will benefit the market over the long run.
We're moving the ball forward on other issues, as well. For example: In Congress, we're working to promote passage of the Self-Employed Mortgage Access Act.
This bill has bipartisan support in both the House and Senate... for good reason. It would better allow lenders to qualify self-employed borrowers for QM loans outside of the GSEs or the government agencies. These individuals already have the ability to repay a mortgage, but because they're self-employed and/or have non-traditional sources of income, they often don't qualify for loans outside of the government-backed channels. They deserve better, and we're committed to help them. This legislation would fix this problem by permitting lenders to move away from the outdated, static requirements of Appendix Q. Instead, lenders could document borrower income through the methodologies already in place in the GSE guides or the FHA, VA, and USDA handbooks.This is a common-sense reform that will benefit millions of consumers. We will not rest until we get it passed by Congress and signed into law.
MBA is also working with the Consumer Financial Protection Bureau to improve the so-called QM Patch... We want to put private capital on a more level playing field with the GSEs.
We all know the current system is flawed. While necessary at the time, the continued reliance on the Patch directs too much of the market to government-backed channels. It helps explain why we haven't seen the return of a truly private MBS market at the level we would have hoped.
The QM Patch is scheduled to expire in less than two years, and a new and improved standard is desperately needed. We're pushing for a rule that fixes two important problems. The first is the use of Appendix Q, as I just discussed, and the second is the cut-off of 43% as a maximum allowable debt-to-income ratio.
Unless these problems are fixed, we fear that many loans that qualify as QMs today will either move to FHA... or not get made at all. That's not right... and we will not let it happen.
At the very least, if the Patch is to be extended temporarily, it should also be expanded to provide safe-harbor status to more private loans - including jumbo loans. Qualified consumers deserve more options and better prices on their mortgages. We will continue to work with the CFPB to make that happen and give consumers and investors the choices and freedom they deserve.
The last issue I'll mention is far and away the most important. The Mortgage Bankers Association continues to be fully focused on Housing Finance Reform.
We're pursuing every angle and pushing regulators and lawmakers to build on the progress that has already been made. More than 10 years after the financial crisis, we still believe Housing Finance Reform is achievable.
One important reason is Mark Calabria's confirmation to head up FHFA.
Director Calabria is a pragmatic man who wants to make permanent progress after a decade of delays. You heard it in his hearings, I heard it in my private meetings with him, and you'll hear it from him later today. This is a man who knows the industry inside and out, and he's committed to preserving what works... and improving what doesn't.
I was in the room when Director Calabria was sworn in. Afterward, he spoke a few words, including that we need to "lock in changes" from the past few years. MBA couldn't agree more. It has been a central theme of our Housing Finance Reform efforts these last few years.
But I was most impressed by Director Calabria during his hearings.
At one point, he pulled out a copy of the 2008 Housing and Economic Recovery Act - the law that created FHFA. It reminded me of how politicians often pull out a pocket copy of the Constitution, and it was clear Director Calabria had read HERA. It was dog-eared and well-worn. I guess that's what you'd expect... from someone who helped write the bill.
Now that Director Calabria is on the job, MBA is in regular contact with his office about Housing Finance Reform. We'll continue to work with FHFA to enact regulations that align with our core principles.Here's what we seek:
- Robust competition in the Secondary Market
- Access to affordable credit for borrowers
- Equitable access and level pricing for lenders of all sizes
- Liquidity through the credit cycle
- Reliable private capital that protects taxpayers
- And an explicit guarantee for Mortgage-Backed Securities backed by conventional loans
In March, MBA led a coalition of more than two dozen groups to call on FHFA to pursue regulations that advance these reforms... We stand with a diverse group of affordable housing advocates, trade associations, and community groups.
And we're also working with Treasury and HUD as they develop plans under President Trump's Executive Memorandum on federal housing finance reform.
Beyond administrative reform, we also seek legislation to address those issues that cannot be undertaken by federal agencies. The truth is that permanent Housing Finance Reform requires action by Congress, as well. That's why MBA continues to work with lawmakers... on both sides of the aisle.I've testified in front of Senate and House committees twice in recent months. I've also held productive meetings with Senator Mike Crapo and Senator Sherrod Brown on the Senate Banking Committee, as well as their counterpart offices in the House.
These leaders have good reasons to get moving on reform before the end of this Congress. Senator Crapo's chairmanship expires next year... and he wants to get reform done first. In the House, Congresswoman Maxine Waters, who chairs the Financial Services Committee, is a long-time advocate for affordable housing. She also has a track record of legislative achievement.
Now, we're not naïve about the hurdles we face. But we do believe that by continuing to work with the key players in Washington, we can be ready to help support legislation... when the time is right.Housing Finance Reform is critically important to our industry... to consumers... and to the American economy. The Mortgage Bankers Association will continue to fight for what needs to be done.
It's been a privilege to address you today.
I know you'll enjoy the program we have planned... but I also know that at a conference like this, much of the action happens in the hallways, in between the sessions and speeches. So I hope you don't mind if I cut my speech short.
I look forward to talking with as many of you as possible over the next few days. By the time you leave, I'm confident you'll have a new appreciation for everything the Mortgage Bankers Association does on your behalf.
We're fighting for you and we're making progress at every turn. With your continued support and leadership, I know... We'll achieve even more in the days ahead.