The Mortgage Bankers Association's annual convention rolled through Austin this year, leaving behind important announcements and implications for the future of the mortgage industry.
Outgoing MBA chairman, Christopher George, gave the conference's opening remarks, welcomed chairman-elect, Brian Stoffers, and stated how the industry doesn't need more rules, it needs better clarity on the existing ones.
In that vein, HUD and the Justice Department announced their joint pullback in its use of the False Claims Act in order to give lenders better protection from legal proceedings.
Mark Calabria, director of the Federal Housing Finance Agency, laid out his plan to get Fannie Mae and Freddie Mac out of conservatorship, a move he supports and is obligated under statute to carry out.
"I think it's a great thing for them to be far less leveraged than they are. The process of exiting conservatorship will help fix a number of things and strengthen the companies," Calabria said in a press conference. "There's just too much exposure. Our most recent stress test results indicated if we had a downturn the size of the last market crash, the taxpayer would be looking at losses in excess of $40 billion. If we do have a downturn in the next couple years, they will fail. They will become insolvent, they will run out of capital. My objective is to avoid that."
Since taking over the position, leverage against the government-sponsored enterprises went to 500 to 1 from 1000 to 1. But as he explained during his open session, it won't matter if every loan a company does is pristine. It'll still fail in a downturn if it's leveraged 500 to 1.
Banding together is the way forward
Technological racing led to rushed adaptation and digital fragmentation, ultimately hindering the mortgage process it meant to speed up. Collaboration and diversity — diversity of people, thought and experience — will help the industry advance and create a better borrower experience in the future.
A shift change needed to occur and it couldn't be done in isolation.
"We work with Fannie Mae to make sure what we're putting together is sellable and regulatory-compliant. To take advantage of some of the innovations that are happening, we work with a company like Blend," Tom Wind, executive vice president of consumer lending at U.S. Bank, said during a panel discussion.
"It's recognizing the size, scope and complexity of the problem and knowing we weren't able to get it done ourselves. But leveraging the talent that's out there, we can ultimately achieve that end goal of giving the customer the great experience through the approval process."
Future of FHA
The share of FHA-insured mortgages originated by depository institutions decreased to under 14% in the 2019 fiscal year, down from about 43% in 2010. Only one of the FHA's top originators was a depository. Research by the Federal Reserve suggests banks' lack of participation has been detrimental to credit access and consumer choice, especially for low-income borrowers.
"We're trying to implement changes to make the process more clear, transparent and fair. We also need to give our lender partners confidence that these improvements will stick," Brian Montgomery, the FHA commissioner and assistant secretary for housing, said during a panel.
The plan for the FHA has three elements. The first is to bring clarity and certainty to FHA forms and requirements. Then, to ensure compliance under all statutes and regulations. Lastly, the process needs to tie together certifications, taxonomy and a memorandum of understanding with the Justice Department.
The outlook for 2020 through 2022 has the largest three-year projection of first-time homebuyers since the Great Recession, according to a study by TransUnion.
The high end of the forecast shows 9.2 million originations from first-time homebuyers in those three years. By comparison, 2016 through 2018 had 7.64 million and 2019 projects 2.7 million.
"Home prices are going to continue to go up, but at a slower pace than they've been," Joe Mellman, senior vice president and mortgage business leader at TransUnion, said in an interview. "The two biggest things are unemployment is at a near all-time low and we're finally starting to see wages increase more than inflation. That's a trend that just started recently and we're expecting it to continue in the near future. The last piece is interest rates are expected to remain low, and that's always good for first-timers."
Millennials and upcoming Gen Z buyers express home owning aspirations, driven by traditional motivations. Nearly 45% of those surveyed wanted increased privacy, 44% want to build their equity and wealth, while about 24% want to purchase because they're planning to get married.
However, the supply of affordable housing is lacking with builders focusing on more higher-end homes. There is also a knowledge gap with prospective borrowers.