On the heels of a legislative battleground regarding housing finance in the U.S. today Mortgage Bankers Association President and CEO David Stevens called for an end to conflicting and overcorrecting mortgage policies that aim to reduce risks, but at the expense of the housing market’s recovery.
“Over the course of our own industry’s history, we have always had to balance access to credit with minimizing risk. It’s a touch balancing act—no doubt about it,” Stevens said today at MBA’s 100th Annual Convention and Expo in Washington, D.C. “And over the years, sometimes the market has gotten out of balance—tilted too far in one direction or the other. Well, today we are in such a moment.”
But even as policymakers have tried implement policies in the wake of the housing market collapse, Stevens suggested that many of those policies have restricted access to credit for many would-be homeowners.
“But our calls have gone unheeded, so I stand here today to say, in the politest way possible—enough is enough,” Stevens said. “The overcorrection and conflicting policies that continue to come out of Washington are threatening not just this market, but they are threatening the recovery.”
Such policies include the Federal Housing Administration’s (FHA) raising of premiums and changing minimum credit score requirements to deal with the fallout of the housing crisis.
“In correcting for the loose standards of yesterday we have stifled access to the credit needed to drive this market, this economy,” he said. “In our effort to be diligent in the face of a collapse in the housing market, policymakers all over town have been making hundreds of policy decisions to clamp down on risk, decisions that may make sense in isolation but in the aggregate are choking off credit.”
As almost 80% of FHA’s purchase business comprises first-time homebuyers, according to Stevens, many of these borrowers have less wealth available to keep up with rigid restrictions, including ability-to-repay requirements and other Qualified Mortgage (QM) standards.
There are also rules that conflict with the new QM standard, as there have been talks that all for efforts to reduce red tape and take the extra step to lend to the marginal borrower, yet this is offset by ability-to-repay requirements that come equipped with penalties should a lender “make even a minor error or dare consider a compensating factor,” said Stevens.
Additionally, talks of replacing government guaranteed mortgages with private capital are met with calls for risk retention only on private capital transactions.
“It’s like the left hand isn’t talking to the right,” said Stevens. “So today we face a true moment of reckoning—especially when it comes to the housing recovery.”
Written by Jason Oliva