Recently I chaired a roundtable on industry issues at the Regional Conference of Mortgage Bankers Associations in Atlantic City, NJ. It was a pretty lively discussion of the challenges and issues facing the business these days.
Panelists are Joseph J. Cudwadie, national sales manager of Olde City Lending Solutions, an appraisal management company based in Washington, Pa.; Michael DiSalvio, senior account manager, Genworth Financial, West Deptford, N.J.; E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey and of the Mortgage Bankers Association of Pennsylvania; and Joseph Sheridan of Real Estate Mortgage Network, Edison, N.J. The moderators are Mark Fogarty, editor, and Brad Finkelstein, associate editor.
FOGARTY: FHA commissioner David Stevens made some pretty frank remarks at this conference, including about the industry policing itself, or the lack of policing. The result was the raft of regulations we are now seeing. What did you think of his remarks?
LEVY: I had a meeting with Rep. Paul Kanjorski a number of years back, and during the course of that discussion, he said to me, "You know, we (meaning Congress) really should not be regulating your industry. I was kind of taken aback by that, because you don't hear that kind of thing from Congress or state legislators. I said to him that is somewhat shocking, why do you say that? He said, "Because I don't think we should regulate you, but you have to self-police your industry. If you do that and do it well and do it the right way, then it works." But he said "if you do not self-police your industry, then we will have to regulate it." And guess what, I think that's exactly what happened. The industry, obviously, did not do as good a job as maybe it should have. And as it said this morning, the so-called "blame" is spread around throughout everyone in the industry, related to the industry, including Wall Street, the rating agencies, all up and down the line. I think quite honestly, the industry, as well as the other entities involved, to self-police and we know that that's the case and so, we are now facing a whole lot of regulation.
FOGARTY: Will the Consumer Financial Protection Agency be enacted, and if so, how will that affect mortgage bankers?
LEVY: It is way too soon to make any predictions, and we don't even know what that is going to look like as it passes through the legislative process.
FOGARTY: Fannie Mae chief economist Doug Duncan spoke about the supply and demand of housing and he didn't think that would regularize until 2013. Do you think that is on the money?
DISALVIO: I think it really depends on the area of the country. Some will (recover) a lot sooner than others. Florida will probably in the later part (of the recovery) with the number of condominiums down there.
CUDWADIE: I own a national appraisal management company. Like, he said, it is a broad stroke. Is it going to change everywhere quickly? We're seeing stabilization. We saw decline, now you are starting to see stabilization. But you are going to need quarters of that. Fannie, for them to say it is a stabilized market, you really need two quarters of no declines in value. I think he is probably right, we are certainly on the upswing, but officially I don't think you will be able to call this a stable market until you see every market for two quarters say that we haven't seen a decline.
SHERIDAN: He was also speaking to all segments of the market, so he was specifically speaking about new construction and I think there are some areas of the country that are so overdeveloped that it is going to take that long for that marketplace to come back, but in the single-family resale marketplace we're seeing some good robust sales going on right now. When you have the glut of foreclosures from people buying second homes under the premise of being owner-occupants, the saturation point in those marketplaces is just overwhelming and it is going to take certainly more than a few years to clear that inventory out fully.
LEVY: There is another factor now, and that is the commercial markets, which I think are going to affect all the markets. As the commercial markets go downhill, which is apparently where they are headed right now, with very substantial foreclosures anticipated, you're going to have banks that have problems as a result. You'll have some banks that are going to close as a result. The bottom is, as that happens and business can't get the credit they need, employment is affected again as a result of that, because the businesses aren't there to employ them. Office buildings will be harmed, because the offices won't be rented. How bad it's going to get? We don't know. I don't think anybody could predict it. It directly affects the housing market, because people without jobs cannot pay mortgages. I think we have a lot to face yet and I would be careful about any predictions with any degree of certainty.
FOGARTY: How is the New Jersey market doing? I looked at the latest Mortgage Bankers Association delinquency numbers and they seemed pretty high. Not Florida or Nevada high, but the state was in the top tier.
LEVY: New Jersey was never impacted as bad as the worst states. We had a lot of folks that for a period of time were hurting because they were Wall Streeters who lived in a lot of our more expensive areas. When Wall Street went to hell in a hand basket, these people were impacted tremendously. But that's come back now, quite a bit. So that population is not hurting the way they did.
SHERIDAN: I think the drama of the impact to those high-income folks and all of the people they subsequently employed due to their net worth, the ripple effect that it's had throughout the New Jersey economy has been pretty dramatic.
FOGARTY: Any idea about what to do about the enormous overhang of loans in the HAMP process? Do you think the HAMP program will have a happy ending?
DISALVIO: Coming from a mortgage insurer, I know the whole mortgage insurance industry is working heavily with the large servicers to get it done. And there are some new programs coming in.
FOGARTY: I remember the Resolution Trust Corp. Nobody thought they had chance of cleaning up $600 billion or whatever it was of thrift assets. They did manage to do it.
DISALVIO: It is just wading through the millions of loans they have to go through. I know that the MIs are putting people inside the servicers' offices to help them modify loans.
LEVY: The difference between the RTC and what we are facing today is that the RTC was taking savings and loan associations and merging them with other organizations which had the capability-the reserves, capital and so-of taking them over. Here, you are talking about consumers who can't afford to pay their mortgages. I think they are two different kinds of scenarios.
FOGARTY: I meant that they were both large government efforts, not that they are otherwise similar.
LEVY: They are that, but I think the results of one isn't going to be predictive of the other, and what we are facing here is still the job market-the loss of jobs, the reduction of income-and right now, there is nothing on the horizon that says that is going to change to dramatically over the short term. For a lot of these folks, you can drop their monthly payments, but if they don't have or they lose their job in the interim, it is not going to do a lot of good.
