Prepared Remarks of MBA President and CEO Bob Broeksmit, CMB, at the 2022 Secondary & Capital Markets Conference & Expo
Bob Broeksmit, CMB, MBA President and CEO, delivered the following remarks at MBA's 2022 Secondary & Capital Markets 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.]
INTRO
Good morning! It’s great to see you all again. And it’s great to be back in the Big Apple. We’ve waited a long time for this day.
It’s been three years since we were together. A lot has happened since then – and the world we live in is very different. But one thing remains exactly the same.
The Secondary and Capital Markets are a cornerstone of America. Thank you for your leadership.
[pause/applause]
A DIFFERENT ENVIRONMENT
It’s remarkable to think about how you led over the past two years.
When we canceled this conference in 2020, the economy was sputtering and families were struggling. No one had any idea what would happen next. But then you did what you do best. You rose to the occasion. You gave millions of families real stability in a fundamentally unstable time.
All told, our industry had back-to-back years of more than $4 trillion in new loans. Each new mortgage helped a family find the home they need at a price they could afford.
At the same time, you helped record numbers of people refinance their homes. Today, from coast to coast, families are paying less and saving more.
And at every stage, you came alongside the hardest hit with forbearance. Then you helped them get back on their feet – and back on track with their payments. A stunning five million families are still in their homes, thanks in large part to your grace and good work.
It’s tough to overstate the difference you made. We’ve heard a lot of talk about “stimulus” and “relief,” but you did more than anyone else to make those words a reality. When interest rates fell, you helped borrowers turn them into refis. And when checks went out, you helped families turn them into the down payment on a new home.
The bottom line is this: You anchored the COVID recovery – and you did more good for more people than ever before. You should be proud of your record. And the MBA is proud to represent you in Washington!
[pause/applause]
What makes these achievements all the more impressive is how quickly you adapted to a different environment.
To start, you embraced virtual operations basically overnight. Then you encountered a sudden and massive shift in the market. What looked like a prolonged decline in volume turned into one of the biggest increases in the industry’s history. You took the unexpected and turned it into excellence.
Now things are changing all over again. After the stratospheric heights of 2020 and 2021, the market is coming back down to earth. To a certain extent, the headwinds we expected have finally arrived. Rising rates are putting pressure on new loans and refis, and after ramping up, the focus is now on scaling down.
I know that’s never an easy thing to do. In my 14 years at Chevy Chase Bank, and before that, at Prudential Home Mortgage, I dealt with the ups and downs of the market, and I’m well aware that lower volumes and lower margins hurt. Believe me, I understand the challenges you face and the decisions you’re making.
But I also know this. You’re in a strong position to weather this storm. More to the point, you’re in a strong position to continue helping families find their homes and achieve their dreams.
I say that because the Mortgage Bankers Association has analyzed the current market. Our findings should give you cause for hope.
First and foremost, markets have already priced in the bulk of the anticipated rate increases from the Federal Reserve. We don’t anticipate mortgage rates will rise much higher than they currently are. They’ll plateau very soon if they haven’t already, albeit with significant volatility.
We’re also confident that 2022 will still be a record year for purchase volume. The number of units will fall a little compared to last year, but the dollar amount of new purchase loans will rise to a record due to the steady increase in home prices.
Refis are a different story. They’ll be down by two-thirds, and while that’s hard to hear, it’s not the full story. The MBA forecast says we’ll still have a $2.6 trillion year in total volume. Two-point-six-trillion-dollars – that’s still one of the eight best years we’ve ever had.
A DECISIVE ADVOCACY
The MBA has fought every day to keep your companies strong, and we’re still hard at work. We believe in decisive advocacy, and whenever a challenge arises, we meet it head-on.
The pandemic was proof. From the moment COVID arrived, we swung into action to give you the policy framework and flexibility you needed. We seized opportunities to address old issues, and as new challenges arose, we tackled them, too.
There are too many victories to list in a short speech. So I’ll just give some of the highlights.
Last summer, after the Supreme Court invalidated the structure of FHFA, we launched a project to help the agency in its transition. We drafted a comprehensive “Day 1 Memo” listing the key policies you and your customers needed, and the moment Sandra Thompson became acting director, we handed her team a copy and offered to help.
In a matter of days, FHFA eliminated the 50-basis-point adverse market refinance fee. It was one of our top recommendations. It’s now a reality.
[pause/applause]
But that wasn’t the only part of the memo that made a difference. Far from it.
Last September, FHFA suspended the limits on the GSEs’ acquisition of loans secured by second homes and investment properties, as well as lenders’ use of the cash windows. When it comes to strengthening the secondary market, wins like this really matter.
[pause/applause]
One reason we’re able to deliver so much for you is that we take a fact-driven approach.
Everything we do is backed up by data, and whenever we reach out to an agency or sit down with a policymaker, we lay out the evidence simply and clearly.
You’d think this would be the default approach in Washington, but it’s not. Honestly, it makes policymakers appreciate MBA and our members all the more.
I was reminded of this a few weeks ago at an event at HUD. I had a conversation with CFPB Director Rohit Chopra, who we’re going to hear from later today. It was a cordial chat, and at one point, he thanked me for how MBA always leads with data.
He called our approach “constructive.” I promised him we’ll keep it up while continuing to press our case for commonsense regulation and enforcement.
[pause/applause]
We’re bringing our factual and effective approach to bear on many pressing issues.
Chief among them is the FHA Mortgage Insurance Premium. We strongly believe it should be reduced, especially in the current market.
As mortgage rates and home prices have shot up, finding affordable homes has only gotten harder. Yet the Mortgage Insurance Premium levels only make loans that much more expensive for borrowers. What’s more, after the past few years, FHA’s insurance fund has a historic cushion. There’s simply no need to charge homebuyers so much.
Even before the current environment, there was a strong case to reduce the premium. Now it’s common sense. We’ll continue to call on FHA to make this change. And I’m confident we’ll make progress in the days ahead as we welcome newly-confirmed FHA Commissioner Julia Gordon to her post.
We’re also focused on the GSEs’ recent loan-level price adjustments on second homes and high-balance conforming loans. The LLPAs came out in January and were effective for April deliveries. You’re now telling us that, as a result, a good chunk of this business is going into the private market.
Let me be clear: The MBA strongly favors a robust private market. Yet the price adjustments may be doing more harm than good. A stated goal was to raise capital reserves at Fannie and Freddie and facilitate more cross-subsidization, but if volume falls to such an extent, the GSEs will be making less money and not building capital. That could limit their ability to reduce LLPAs for more mission-centric borrowers.
That would be an unfortunate result, and when the LLPAs were announced, we called on the agency to reconsider if evidence emerged that it overshot its targets. That now appears to be the case. The MBA will continue to take that message to FHFA until it moves in the right direction.
Even without the LLPAs, the private mortgage market is making a comeback. There’s a healthy amount of innovation from lenders, now that so many products don’t fit in the conforming bucket.
The MBA welcomes this development. There are now many safe and effective ways to verify income. That includes relying on 6 to 12 months of banking history as well as enhancements to cash-flow underwriting. These developments promise to give borrowers more options while protecting the broader economy.
The private market is only going to get more durable – and we’re doing our part to help. MISMO, the language of lending, is creating a new standardized Private Label Securitization dataset to support faster, more efficient, and more accurate due diligence for private label RMBS transactions. When this standard is finished, the days of 100% manual due diligence will finally be over. It can’t come soon enough.
Such advances are exciting. Yet the GSEs have a continuing role in the market, and the MBA wants to see them succeed. That’s why we’re concerned about the recent turnover at both Fannie and Freddie.
Having worked so closely with the GSEs to break down barriers during the pandemic, we know how much their staff matters. Yet now large numbers of talented individuals are leaving, and if they aren’t replaced with the best and brightest, Fannie, Freddie, and America will suffer.
We’re working with FHFA to address this issue. In a recent letter to the agency, we urged it to adopt compensation levels that attract and retain talent and structures that encourage prudent risk management and financial stewardship. We look forward to achieving that balance and ensuring the continued effectiveness of the GSEs.
[pause/applause]
CONCLUSION
There are many other issues I could discuss, but I bet you’d rather hear from someone else. Fortunately, we have an all-star lineup of speakers.
Director Rohit Chopra from the CFPB. Acting Director Sandra Thompson from FHFA. President Alanna McCargo from Ginnie Mae.
And in just a few moments, we’ll hear from the President of the Federal Reserve Bank of New York – John Williams. As a permanent member of the Federal Open Market Committee, he’s worked closely with us to navigate the difficulties of the pandemic, as well as the current environment. I couldn’t be more grateful for President Williams and the New York Fed’s partnership. And I couldn’t be more excited to hear from so many key officials over the next two days.
Before I go, I want to encourage you to do even more to help MBA deliver for you.
If you haven’t already, please sign up for the Mortgage Action Alliance. It’s the single best way to influence policy at the highest levels of government. Membership is free and tremendously effective. Case in point: The Alliance played a key role in the elimination of the adverse market refinance fee that I mentioned earlier. I also urge you to find out more about MORPAC, MBA’s Political Action Committee, and how you can support it. MORPAC helps elect lawmakers who will work to expand access to homeownership. With the midterm elections coming up, we need to support candidates who support the American Dream.
One thing is certain: Now is the time for leadership. And as I look out across this room, I see the leaders who have already done so much for our economy and country.
It was true the last time we were together, in 2019. It’s even more true now. The past two years saw you reach new heights of service to society. Tens of millions of people are better off now, thanks to you.
As the pandemic fades, a new set of challenges has come up. But I’m not worried – because I know you.
You’ll overcome these challenges, same as before, and when we meet here next year, we’ll celebrate your achievements and impact on America.
Not only that: we’ll empower you to make an even bigger difference. You deserve nothing more, and the MBA will deliver nothing less.
Thanks again for being here. It’s good to be together again.
It is now my pleasure to welcome to the stage our Chair for 2022. She’s the Executive Vice President and head of Home Lending at Wells Fargo. Fercho joined Wells Fargo in 2020 from Flagstar Bank, where she had served as president of the company’s mortgage division since 2017. Prior to joining Flagstar, she spent 15 years with Fannie Mae, where she led the strategy and business performance of single-family customers in the western United States.
Please welcome Kristy Fercho!