The days when people grew up, got married, got a job they would stay with
for life, had 2.5 children and bought a house are gone according to Mortgage
Bankers Association (MBA) President David H. Stevens. While the dream of homeownership survives, the
future America will have more single family homes, a growing immigrant
population and an aging population of Baby Boomers. Stevens does not think the current housing
market system can sustain these changes.
Stevens, writing a guest column called "Change is Coming. Is the Market Ready?" in RealtyTrac's latest
issue of Foreclosure News Report says
we have an unsustainable, imbalanced government presence in today's housing
marketplace. The lack of coordination
across federal agencies in propagating confusion and uncertainty in rulemaking. Freddie Mac and Fannie Mae (the GSEs) post
record profits while only borrowers with the most pristine credit can get
mortgages. The lack of recovery in the purchase
market has been obscured by massive number of homeowners who have refinanced,
many through the Home Affordable Refinance Program (HARP).
Today the Millennial generation (born between 1980 and 2000) makes up 25
percent of the workforce and will constitute 40 percent by the end of the
decade. Many are already looking to buy
homes. Stevens says this generation has
moderate credit scores and only enough savings for a low down payment at a time
when policymakers in Washington are proposing higher down payment requirements. At the same time rulemaking confusion only
adds to the problem of getting the housing market back on track.
Stevens cites the conflict between disparate impact rules and the QM
standards and that an emphasis on attracting private capital runs counter to
calls for risk retention on private capital transactions. He refers to the risk retention standards of
the Dodd-Frank Act as regulatory madness, however his objection seems to be
centered on those proposals for higher down payments which were not the intent
of the framers of the bill. Such a hike,
he says, could restrict more than 75 percent of
qualified homebuyers from accessing the most competitive, affordable loans."
Stevens says minorities and immigrants are also being squeezed, citing 2012
HMDA data that shows denial rates for African Americans on conventional
purchase loans running over 50 percent. "That suggests an awful lot of borrowers are being denied
access to credit under today's very tight, post-crisis rules," he says.
MBA's Research Institute for Housing in America projects
that immigrants will constitute 32.2 percent of household growth between 2010
and 2020, 35.7 percent of the growth in homeownership and 26.4 percent of
renter household growth and Hispanic, Asian, and Black households will grow by
65 percent. Stevens said he must ask,
given the difficulty of these demographic subsets in obtaining loans, if
renting will overtake homeownership.
He blames the GSEs for eliminating the ability of
borrowers with average credit and low down payments to have access to mortgages
at reasonable prices because of the strict standards they place on lenders who
sell them loans. "Add-ons, called
loan-level price adjusters, for credit scores below 740, or LTVs above 80
percent, on top of base guarantee fees, adverse market fees, and mortgage
insurance fees have produced a portfolio that - as was
said in the recent HMDA report - 'implies no risk taking,'" Stevens says. Fannie Mae and Freddie Mac are virtually
printing money for the Treasury and this costs homeownership and the broad recovery
of the housing market.
Stevens believes we are approaching a situation where demand
will outstrip both housing supply and available credit for middle-class
borrowers. Striking a balance between
risk and access to credit has always been difficult and now we are a long way
from the right balance.
Stevens, like most in the industry, calls for reforms
that encourage more private sector participation and says there is no doubt
that the conflict in rule-makings is hampering this goal and repeats his and
MBA's frequent earlier calls for greater transparency from Freddie Mac, Fannie
Mae, and their conservator the Federal Housing Finance Agency (FHFA) in their
policymaking process and more opportunity for stakeholders to weigh in on major
"We, as one industry," Stevens says, "can help the economy
find its footing at a time when it could really use a boost. As rates start to
rise, the recovery will need every ounce of help from all sectors of the economy.
The real estate finance business can be an ally to growth if the policymakers
partner with us -rather than hold us back."