Any insight into the future of the mortgage industry given by the speakers at the Regional Conference of Mortgage Bankers Associations in Atlantic City was hazy at best. Because almost every speaker at the first morning's general session agreed that if there is any one word defining what it is happening in the business right now it is uncertainty. And speakers at our roundtable discussion agreed with them.
There is uncertainty about the form any new regulations coming out of the Consumer Financial Protection Bureau will take. And possibly holding back a recovery in the housing industry even more is the uncertainty of the direction of the American economy.
Tight underwriting and fear of continued declines in home prices are a double whammy on the availability of mortgage credit.
This portion of a roundtable conducted by National Mortgage News picks up on that theme of a future in doubt. SourceMedia Mortgage Group editorial director Mark Fogarty and vice president and group publisher Tim Murphy were joined by E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey/New Jersey Association of Mortgage Brokers; Regina Lowrie, former chairwoman of the Mortgage Bankers Association and current president and CEO of Vision Mortgage Capital, a division of Continental Bank; and Paul Logan, president of the Pennsylvania Association of Mortgage Brokers and an account manager with Franklin American Mortgage.
FOGARTY: Dave Stevens said at this conference that there is complete uncertainty in the business which is blocking mortgage growth. Presuming you all agree with that, how do you unblock it?
LOWRIE: I do agree with Dave Stevens that I think there's uncertainty on a number of fronts—the legislative front, some of that has to do with it being an election year. The other is the lack or inability of Congress to be able to move forward on specific issues. I think another part of the uncertainty is that we have a 2,300 page Dodd-Frank legislation that has yet to be regulated. Speaking for myself as part of a community bank, there is a lot of uncertainty as to what's going to come out in regulations to Dodd-Frank. And I think all of that pervades in the media to create uncertainty for consumers and how mortgage bankers are perceived in the marketplace. So I think a lot of it is trying to re-instill confidence with the consumer market, and for us to continue to advocate on Capitol Hill and with the regulators on behalf of the industry for the good of the consumer.
LEVY: I mentioned (at the session) that I have concerns on a subject that hasn't really been addressed yet, which is the unfair, deceptive and abusive acts and practices. In the past you had those UDAAP issues raised in lawsuits, which is one thing. But when given that authority to examiners for the CFPB and state regulators saying you can go in and you can determine there are unfair practices going on, these are ambiguous terms. Particularly the new term, abusive practices, nobody has defined that yet. And the CFPB will tell you very bluntly they don't know what it means. So when you have that kind of uncertainty, I think on a subjective basis it would be easy to go into any company of any kind, if you search hard enough, you will find something you'll call unfair. And that bothers me a lot. But specifically how you deal with it, we need to show CFPB and Congress, the impact on the consumer, and the fact that, as Regina said, with all this uncertainty, not only are the consumers confused, they are not sure what to do. You've got to convince the powers-that-be that the uncertainty is causing a lot of the problems we are facing to day. And if you ever want to recover out of the recession in a significant way, you've got to resolve the uncertainty.
LOWRIE: I think the other reason it is so critical is that housing drives the U.S. economy. It's a big percentage of GDP. So clearly we won't see a full economy recovery until we see a recovery in the housing industry.
LOGAN: There is also the general market place and the public and how they see housing at this time. There has been holdback on them purchasing homes because they feel if they wait another few months, it will go down in price even more. This rapid deflation has caused a lot of turmoil in the system. Those that can't sell their homes because their homes are underwater, they are locked in there. This is all stopping movement. That pent-up demand is there, it can't get through because you have these inherent holdbacks. So this is a real problem. I was just chatting with Regina and I ask her how was it going for her business. And she said purchases are improving.
LOWRIE: I think for the first time since 2007, I'm seeing a more—I wouldn't say totally normal, but a more normal—spring market. And as Paul said, there is a pent-up demand. A lot of it is first-time homebuyers, they that don't have to worry about selling a house. So I think that's a segment of the market that we're starting to see move. We saw how the stock market reacted to positive economic news such as the unemployment numbers—I think all of that will help build consumer confidence.
LEVY: When consumers see other consumers buying or starting to buy and when prices start to edge up, people hear that and they say, “I better get there now because these great buys aren't going to be here next year.” I think that will motivate more purchases as well.
FOGARTY: Dave Stevens also mentioned there is a huge cohort of Generation Y people, larger than the baby boomers, moving into their home buying years. And they are a different demographic. Minorities have always been trailing behind on the percentage of home ownership. Is the mortgage industry ready to work with these groups and if not, how do you get ready?
LOWRIE: I would we say we are ready, because we've seen that over the last two years. There has been an increase in what I call the emerging markets, not just Hispanics, but also Asians and African-Americans and the industry has done a good job. We see there are products out there, a big percentage of those loans are done through FHA. The housing finance agencies have served that segment of the market well with mortgage revenue bond programs. And I think the private mortgage insurance companies are starting to open up their guidelines. That is a thing we have to continue to be mindful of as the credit markets improve, is access for low- and moderate- income borrowers.
MURPHY: I think that's where the qualified mortgage definition comes into play. If that's not resolved in a favorable manner, you might have a disconnect between what's available and who's out there.
LOWRIE: That's an excellent point. MBA did some statistical research on that. That would have cut out a huge segment of the first time homebuyers and the low- and moderate-income buyers. It is the one time where I've seen the mortgage bankers, the Realtors, the National Association of Home Builders and the consumer groups all aligned on this issue, because it is going to impact low- and moderate-income buyers.
