Reiterating comments made four years ago at an annual Mortgage Bankers Association conference, MBA President and CEO David Stevens this week said real estate finance is still stuck in the same “sick system” as it was during the throes of the housing crisis.
Speaking at MBA’s 2014 Secondary Market Conference & Expo this month—the very same one Stevens made his remarks four years ago, then as FHA Commissioner—The MBA chief cited the government’s increased role in housing, as it backs 90% of mortgages in today’s market, is the principal concern for his comments.
“It is four years later and the government isn’t still just the backbone, but has become the entire central nervous system of the real estate finance market,” Stevens stated. “When the federal government is still backing nearly 90% of the mortgages made in today’s market, it’s apparent that the real estate finance system is stuck in the same place it was when I took this stage four years ago.”
MBA continues to believe strongly in a secondary market built on private capital with an limited government guarantee, however, the secondary market as it exists today is having negative impacts on mortgage affordability and availability.
The current average credit score in America is about 700, whereas the average credit score for a borrower with a loan backed by Fannie Mae during the first quarter of 2014 is 741, Stevens noted.
This disparity, coupled with loan level price adjusters, overlays and increasing guarantee fees, all add to the system that is tightening mortgage affordability and availability, in turn leaving over an estimated 10 million qualified families on the sidelines, according to figures attributed to Mark Zandi, chief economist of Moody’s Analytics.
“For the past four years, we have advocated for change. Here’s why—change is inevitable,” Stevens said. “It’s not a matter of if; it’s a matter of when. The status quo is not an option.”
Stevens also commended efforts for GSE reform, specifically the Johnson-Crapo bill, which he said represents a “good starting framework,” but will be a longer legislative process than than what the MBA could have hoped.
The bill, titled The Housing Finance Reform and Taxpayer Protection Act of 2013 (S.1217), aims to wind down and eliminate Fannie and Freddie and create greater competition in the housing finance market by inviting he return of private capital.
Last week, the bill was passed by a bipartisan vote in the Senate Committee on Banking, Housing and Urban Affairs, and is currently awaiting a vote from the full Senate.
“We have to continue to press Congress to move forward. We have to work with Fannie, Freddie and FHFA on transition,” Stevens stated. “Because in the end, it’s our future, and the future of the American homebuyer, that is being held back by the sick market.”
Written by Jason Oliva