It’s less than a week away from the pinnacle event for U.S.
mortgage professionals – the Mortgage Bankers Association’s (MBA) annual
conference, MBA Annual 23, which is set to run Oct. 15-18 in Philadelphia.
To get a sense of what pressing topics to watch for
during the event, Dodd Frank Update caught up with former MBA President
and CEO David Stevens, currently serving as CEO of Mountain Lakes Consulting,
Inc. Although Stevens will be away for a family occasion during the conference,
he had plenty of insight to share.
Perhaps the top issue on the minds of mortgage lenders is
interest rates and their impact on the mortgage marketplace, Stevens said,
explaining that much of this is related to lingering effects of stimulus
spending and significant inflation during and immediately after the height of
the pandemic.
“The mortgage industry is in relative free-fall right now,”
Stevens said. “There is concern about the major role the Federal Reserve played
in creating the current mess by overreacting to the pandemic through too much
stimulus spending and the purchasing of mortgage-backed securities (MBS), also
called quantitative easing, in an effort to reduce rates and increase lending. Then,
the Fed got out of the MBS market, creating a sort of vacuum for the rest of
the marketplace. Had these things not taken place, the average price of a
mortgage would likely be 100 basis points lower than it is today.”
To his point about rates, Stevens referred to a letter signed
by MBA, the National Association of Home Builders, and the National Association
of Realtors, urging the Fed to make the following two clear policy statements:
·
“The Fed does not contemplate further rate
hikes;
·
“The Fed will not sell off any of its MBS
holdings until and unless the housing finance market has stabilized and
mortgage-to-Treasury spreads have normalized.”
Newly proposed Basel III rulemaking represents another major
concern for the industry, Stevens said.
“The Basel III rule is a really painful rule because it
applies much higher risk-weighted capital requirements on the large banks with
over $100 billion in assets and doubles the risk-weighting for loans they
issue,” Stevens explained. “Loans with low down payments already have really
high risk-weighting and this further increases the prices of loans for
first-time homebuyers and minority homebuyers.”
This is a topic Stevens expects multiple industry insiders
to touch on during this year’s conference, given its massive implications for
large mortgage lenders.
Thirdly, Stevens expects there to be a great deal of
discussion about increased loan sampling related to the government-sponsored
enterprises’ (GSEs) repurchasing activities. Mortgage lenders are concerned
this change will cause more undue stress in the marketplace.
“The GSEs are sampling more loans and when they find any
defect, they are making the lender buy it back,” Stevens said. “Lenders complain
that, in many cases, these are performing loans and most of the defects come
down to a difference of opinion in the underwriting.”
Stevens offered an anecdote in which one self-employed
borrower could have three different underwriters draft contract terms based on
the same information and end up presenting three different calculations for data
such as annual income.
“Banks are losing capital already and having to buy back
mortgages on top of it just adds to their stress,” Stevens said. “It feels like
a slap in the face because this goes against previous agreements between the
industry and the GSEs.”
MBA Live attendees could witness announcements by Federal
Housing Finance Agency (FHFA) Director Sandra Thompson regarding whether the
FHFA will expand Federal Home Loan Bank (FHLB) membership to non-banks, as well
as an update on proposed changes to the agency’s credit policy to utilize
VantageScore ratings in addition to FICO.
Stevens acknowledged the recent increase in interest in
artificial intelligence (AI) and its ability to aggregate data needed for loan
applications and for determining underwriting requirements, but also noted it
presents huge risks for fraud and theft – all of which are topics slated to be
covered during the conference. The Consumer Financial Protection Bureau (CFPB)
recently published guidance on the use of AI in mortgage lending decisions and
CFPB Director Rohit Chopra is among the federal regulators slated to speak
during the conference.
Dodd Frank Update will be in attendance for MBA Live.
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