The uncertainty impacting the mortgage banking industry for the past few years is starting to clear as the housing market is healthier and much of the rulemaking around Dodd-Frank is now out, Mortgage Bankers Association
Speaking at the Regional Conference of Mortgage Bankers Associations in Atlantic City, N.J., Still continued that the short-term challenge facing the industry is fourfold. The rules need to be right, she said, adding the Consumer Financial Protection Bureau has gotten things mostly right but it wasn’t perfect. Secondly the rules needed to be aligned, followed by they need to be understood and finally the rules have to be implemented and that will take some heavy lifting.
Still said all parties need to make sure that the need for consumer protection in the rules is balanced with access to consumer credit.
The CEO of Radian Group, S.A. Ibrahim pointed to the recent successful capital raising by his company and competitor MGIC Investment Corp. as a sign that the private equity markets have an appetite for housing related companies.
He pointed out that Radian priced the offering at $8 per share, which was below the closing price from the previous day. Now the stock is trading 20% above the offering price.
But Jack Konyk, the executive director of government affairs at the law firm of Weiner Brodsky Kider PC, declared that private capital would love to come back into the mortgage market. It hasn’t and that is because of the uncertainty which remains ahead for the mortgage business.
There is still more rulemaking to come from CFPB. That agency also has supervisory authority and “unprecedented tools” for enforcement, he warned. Among the things lenders need to be worried about is CFPB looking for unfair, deceptive and abusive acts and practices as well as disparate impact.
Still said that through all of this originators need to think about their customer. Right now the industry has gotten “task oriented” in underwriting loans and it has forgotten about the consumer, she declared.
So one of the things they are doing at Pulte Mortgage, where she is president and CEO, is putting in place a lot of technology to cut down on mistakes in the origination procedure.
Those companies which can build an efficient and transparent loan manufacturing process will be the ones that survive, she said.
When asked about the continued rise in guarantee fees, Ibrahim said from the private MI perspective those can end up driving more business to the Federal Housing Administration program, even as that agency is taking action to increase the mortgage insurance premium.
The aim of the rise in g-fees is to encourage private capital to return.
But Real Estate Mortgage Network CEO Peter Norden asked rhetorically at what point in time does private capital come back into the market. Right now yields on mortgage-backed securities are way too low for these firms to invest. If g-fees are raised another 200 basis points it would destroy the housing market.
Gary Cipponeri, senior vice president and director of capital markets at Chase Home Finance, said there has been a back door way private money is entering the markets and that is through the portfolio capabilities of the depositories.
They are seeing that these products look great in their portfolios, he said, but the unintended consequences might be that it could bring a situation reminiscent of the thrift crisis.
Norden added that he doubted the government did not want to shift mortgages away from the government-sponsored enterprises to the big banks; that could take the housing market down.
The conversation on the panel turned back to serving the needs of the customer. Michael Vitali, the executive vice president of TBI Mortgage Corp., told originators to survey their customers and actually listen and act on what they say, not just filing them away.
He told an anecdote of one dissatisfied client who Vitali called after the company received a negative response. Because TBI responded to the customer’s concerns it was able to turn that person into a fan.
Regina Lowrie, president and CEO of Vision Mortgage Capital and a past chairwoman of MBA, said for lenders to document every customer complaint and the actions they took to resolve it, this is one area CFPB, which has its own consumer complaint line, is concerned about. Konyk added companies also need to show what they did to train their employees to make sure the situation does not reoccur.
