[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.]
Good morning! It’s great to be with all of you.
I’d like to welcome you to our Secondary and Capital Markets Conference. And much more
importantly, I’d like to thank you for all you do inour industry and economy.
For most consumers, and quite a few policymakers, the secondary and capital markets are some of the least understood parts of the mortgage world. But the fact is, you make an enormous difference for tens of millions of families.
It’s an honor to represent you in Washington, D.C.
When I spoke here last year, I praised you for stepping up during the pandemic, and I talked about the challenges coming our way. The economy’s warning light was already flashing, and it was clear that hard times were in store.
Those times have now arrived. No one knows it better than you. Higher interest rates, lower inventory levels, and lower or negative margins make for a difficult market. Having spent over 20 years at Chevy Chase Bank and Prudential Home Mortgage, I know the challenges you’re facing and the choices you’re making. Believe me, I do. I wouldn’t wish them on anyone.
But I don’t share just your concerns about the economy. I also share your frustration with much of the government’s response. You deserve better than what’s happening right now.
I’m going to pause for a moment. If you can’t tell, my speech this year is going to be more… pugnacious than normal. Well, I think the times we live in demand a tougher tone.
My job gives me a front-row seat to the workings of government. Every day, I hear from policymakers. Every day, I see the rules they roll out, and the ones coming down the pike. Frankly, what I’m witnessing is deeply concerning.
Let me explain. Whether it’s in Washington D.C. or state capitals, elected officials see the same economy that you and I do. They know your businesses are struggling. They know you’re making difficult decisions, and that many of you are fighting just to keep your doors open. And they absolutely know you’re making sacrifices to keep serving your customers at the highest level.
The logical reaction would be to find ways to give you relief. Instead, policymakers are piling on with more enforcement and stifling levels of red tape. You and your customers need things to get easier. Instead, officials are often making things harder.
It’s astounding, isn’t it? There seems to be a sense, at the highest levels of government, that the mortgage industry needs to be reined in. It’s a stark contrast to where things stood throughout the pandemic.
Think about it.
This time two years ago – or even just 12 months ago – policymakers were thrilled with your leadership. From the moment the pandemic hit, you stepped up with real action and record achievements. Millions of families stayed in their homes thanks to your forbearance. And millions more benefitted from new loans, better loans, and their first chance at homeownership.
What has changed in the intervening months? Well, I’ll tell you what hasn’t changed. To start, your leadership. You continue to look for new and better ways to serve your customers. Your commitment to them hasn’t changed, either. You’re pulling out all the stops to help them achieve the American Dream.
What has changed, though, is the economic landscape. People are hurting, and policymakers want to do something. Yet in their rush to react, they risk doing more harm than good.
A case in point is the response to bank failures. At the start of this year, hardly anyone expected SVB, Signature, and First Republic to implode. When it happened, it was a shock, and it was over almost as quickly as it started.
No one likes a bank failure, of course, and no policymaker wants to be blamed for the next bank failure. That means there will likely be a rush to regulation, instead of a sober analysis of what happened and why.
Here’s the reality. The recent bank failures clearly resulted from their unique business models, their corporate mismanagement of interest rate risk, and their customer homogeneity. There were also serious lapses by regulators, as officials have admitted.
The solution to this crisis starts by addressing those lapses, not looking for an excuse to expand government power. If regulations weren’t followed, or if regulators missed something they should have caught, then policymakers should make sure the relevant agencies do better next time. The best path forward is to enforce the rules that are already on the books.
But that’s not happening. Some policymakers are pushing for a slew of new rules on completely different parts of the economy. We’re talking about one-size-fits-all mandates that will do extraordinary damage. And let me be clear: They’re likely to impact companies like yours, even though you had nothing to do with these bank failures.
A case in point is the CFPB. Director Chopra has suggested he may unilaterally push for prudential standards for non-banks, including IMBs and mortgage servicers. At the same time, the CFPB and the Financial Stability Oversight Council (FSOC) are now seeking comments on subjecting nonbank financial companies to Federal Reserve supervision.
Where to start? How about the fact that non-banks played no role in the current banking crisis. There’s also the fact the CFPB’s legal authority in this space is profoundly unclear and utterly untested.
To be blunt, this looks like a power grab. And not only that, it looks like a clear-cut attempt to punish an industry that some policymakers seem to personally dislike or distrust.
The entire premise behind this policy is flawed. It’s based on the assumption that non-bank financial companies like IMB servicers pose a systemic risk to the economy. My question is simple: Where’s the proof?
The answer: there is none – because it doesn’t exist.
That’s just the start of the problems. FSOC has also proposed eliminating the cost/benefit analysis that would tell them the damage this policy would do. Let me be clear: You can’t have good policy without a cost/benefit analysis. It’s the bare minimum, and the MBA is making that clear, with maximum volume.
Make no mistake: MBA vehemently opposes labeling non-bank servicers as systemically risky. This is a solution in search of a problem. And if these proposals move forward, who will be left to service millions of loans? Onerous policies have already driven so many banks out of the market. It makes no sense to punish the IMBs who stepped up to fill the void. Who will lend? Who will service? These are serious questions that policymakers need to answer, before it’s too late.
The MBA is pushing for clarity and common sense. We’re talking to the CFPB, Congress, and the White House about what needs to be done – and what should never be done.
Our message is simple. You helped bring America through the pandemic. You don’t need
punishment or more regulation. You need praise and relief, and you need it now.
There are many other places where the MBA is pushing back on over-regulation. We’re simultaneously pushing for greater certainty, stability, and clarity.
A good example is the recent legal effort to make lenders liable for the actions of independent appraisers. The CFPB and the Department of Justice are advancing this idea. They’re doing so in response to instances of apparent bias in the appraisal process.
First and foremost, we all agree that appraiser bias is unacceptable and despicable. That is not the way lenders run their businesses. And no lender would willingly do business with a biased appraiser.
Our second point is that it’s also unacceptable to ignore the facts. Lenders are legally prohibited from interfering with appraisers. You don’t control how they work, what they do, or which numbers they come up with. As such, it is patently absurd to hold you liable for their actions.
We’ve made these points in a hard-hitting brief in a federal lawsuit. And we made clear that we oppose this expansion of CFPB authority, even as we support expanding equity and fairness in lending. Now is the time to make further progress, not empower the bureaucracy at the expense of lenders and consumers.
Another policy fight we’re actively waging involves loan repurchases. As you’re well aware, Fannie and Freddie are demanding that lenders repurchase more and more loans, including seasoned performing loans, with minor underwriting issues.
Let’s put this issue in perspective. Many of these issues were the result of the unprecedented number of loans you processed in the early days of the pandemic. They reflect your swift action, during a national emergency, to help as many people as possible, as quickly as possible.
Not long ago, that action earned you well-deserved praise. Now, for all your heroic efforts, the GSEs are punishing you. They want you to buy back loans when interest rates are twice as high. That would be disastrous, putting further strain on your balance sheets.
But it doesn’t have to be this way. When it comes to loans with minor issues and seasoned performing loans, you should be allowed to address those issues through steps far short of repurchase. We’re making this point to the GSEs and FHFA regularly, and I’m confident you’ll see relief soon.
The final topic I want to discuss is the LLPA situation.
We were all concerned by the pricing grid policies that FHFA released in January. The timing wasn’t great, to put it mildly. The changes added further hassles and costs at a time when your margins are already stretched to the breaking point and borrowers are facing higher rates and greater supply and affordability challenges.
On the one hand, the revised pricing grids are more logical in some respects. But FHFA could have been more transparent about its decision-making process. That’s why we support and will comment on the Request for Input on GSE pricing that FHFA released last week.
The bigger concern voiced by our was FHFA’s debt-to-income ratio proposal. It would have added three eighths to the price for a wide swath of GSE loans. This idea was completely unworkable, and it would have hurt consumers most of all.
We told FHFA what was going to happen. It would have been an operational nightmare, raising costs at the worst possible time. What’s more, it would have left consumers with a frustrating and confusing experience – the opposite of what we all want them to have. Our ultimate point was that nobody wins, so the policy clearly needed to go.
Fortunately, FHFA heard our feedback. In March, it delayed the DTI proposal by three months. And just a couple weeks ago, it canceled this policy altogether.
This win was a team victory, with MBA and its members working together. We got the ball rolling. We brought our concerns to FHFA’s attention, repeatedly, starting in early February, then carried them to Congress to keep up the pressure. Then we brought in heavy hitters, which are you. Our members met with the agency and key members of Congress – and it worked. Thank you for helping us get this win across the finish line!
I tell this story last to prove that the MBA gets results when it really matters. I hope you’ll keep that in mind in the days and months ahead.
There will be plenty more concerning policies coming down from on high, and across the board, we’re responding with action. We have strong relationships with federal agencies, the White House, and lawmakers in Congress, on both sides of the aisle. When we speak, they listen. And right now, we’re speaking loud and clear, on a host of issues.
Everything we say, and everything we do, is grounded in the same message. Your companies are the backbone of the economy, and the cornerstone of communities. You’re struggling right now, and the last thing our leaders should do is harm you. In fact, they should do the opposite, and look for ways to help you and the tens of millions of people you serve.
This is the message that matters most right now. And we’ll keep spreading it. If the last few years prove anything, it’s that the MBA makes a difference for you. More importantly, the recent past is a powerful reminder of the difference you make. You have a huge impact on the lives of so many people, and in the life of our nation as a whole.
It’s a privilege to represent you in our nation’s capital. And on behalf of the entire Mortgage Bankers Association, we’re proud to keep fighting, and winning, for you.