I was handed a book on the way home from Christmas Mass at
my church this year titled "The 4 Signs of a Dynamic Catholic". About halfway through the book, there was
some discussion about the present day struggle to affect any meaningful change
in this world because we have become far more oriented towards maintenance,
rather than mission. It got
me thinking about the mortgage industry. Are we
collectively on a mission, or simply in a perpetual state of maintenance?
haven't guessed by now I am a hopeless movie addict, and since the only way I
can discuss anything mortgage related with my wife is to extract the eye
glazing finance language out of it, I often find myself drawing analogies to my
favorite scenes so I can talk about how things are in my world.
think mission, I see bold coordinated and purposeful action taken by small
groups of very well organized and expert players with a specific goal in mind:
stop the nuclear timer on the bomb, save the damsel in distress before the chip
in your brain blows up, or save the world without anyone even knowing what you're
think maintenance, I flash back to my high school summer work days, scraping
peeling paint from an investor's rental property, or weeding a yard in 110
degree heat. The $10/hour was good money
considering how many miles per gallon my weekend party ride-a 7 passenger
station wagon-got on a good day. My role
was always to just keep the property looking good enough to rent to another
tenant, not to make any massive curbside appeal changes. The investor didn't really care if I made it
look like the Taj Majal, and I had more than enough gas money.
CFPB proudly furthers their consumer protection mission by beginning to reveal
their QM definition, and the media spins our perceived reactions, the housing
industry is showing some signs of recovery.
the mortgage industry have a consumer protection mission? If not,
comments I have read from the MBA, the NAFCU, the CRL and the NAHB applaud the
goal of the regulations to ensure borrower receive a loan they can repay. It is still difficult for me to believe that
1500 pages and a new regulatory agency were needed to set that goal.
the question though: what was our goal before these rules were set? Just make the loan and don't worry about the
ability to repay? Amazingly
the Qualified Mortgage/Ability to Repay rule still does not speak to the
ability to repay if the price or value of the asset is too high.
already seen a number of conversations in the MBS chats and on various blogs
pointing out the multiple offer environment that is beginning to evolve as the
housing market turns the corner.
Preapproved borrowers are getting frustrated that they have to offer
$10,000 or $20,000 above the sales price, only to have the appraisal come in
lower. In many cases, they are paying
the cash to close the loans anyway. Does this meet the Safe Harbor rule? It doesn't even apply. It is a high cost way to close a loan that
reduces the borrowers liquid assets by $10,000 to $20,000, but it doesn't
affect their ability to repay the loan.
written often in the last 6 months about the number of HARP 2.0 refinances I
continue to close where the borrowers put down 20% during the housing boom
heyday. These were all QM mortgages by
today's standards-30 yr fixed
conventional fully amortizing loans.
years of non stop housing price depreciation they were months away from turning
in their keys. With house rentals
running $200 to $300 lower than what they were paying on their mortgage, it was
easy to see why the debt reducing idea of rational default was beginning to seduce
them. Why sink money into a declining value asset with no payment reduction
relief in sight?
the people I spoke to at Foreclosure Prevention workshops I volunteered at in
2008 & 2009 said they could probably make the payments, but that they had
been told their values would be going up, and that was why they took out
mortgages without much concern for their ability to repay to begin with.
that problem been solved with QM?
noted in an article in Newswire this week "that appraisals continue to be a problem
because values are not keeping pace with the appreciation in market values. Realtors complain that appraisers continue to
use foreclosures as comps." Realtors have
also expressed concerns about "unreasonably tight credit conditions." How does the mortgage industry reconcile its
need to maintain adherence to the regulatory guidelines being imposed on it by
the CFPB, while maintaining productive alliances with Realtors who use their
media mouthpiece to push the mortgage industry to do more to make the sale?
the answer lies in deciding whether we are an industry on a mission, or in a
state of maintenance. Maintenance
is obviously the easy path.
maintain our composure while more regulations are designed that will force more
legal and QC hiring to interpret the rules and guard against violations. We can maintain our hold on our respective
business models and lending channels and hope that it is the other guy's
channel that takes the hit from this round of changes and allows us to gain
from his losses. We can maintain a status
quo relationship with business partners that are pushing us to do the
while they enjoy relative freedom from the regulatory forces
microscopically scrutinizing the decisions we make to finance homes.
can develop a mission. I have
one to suggest: Let's
restore investment value to homeownership.
execution of this mission requires a coalition engaged in respectful action
among all of the respective mortgage financing experts and business partners-the
title experts, the appraisal experts, the secondary market experts, the
underwriting experts, etc. It will
require an honest assessment of how to make this mission possible. We can
choose to accept this mission or stay in maintenance mode.
years now I have written about the need for a unified voice, a counteroffensive
of active intelligent moves to end our retreat amid the awful mess of the last
four years. Incredible minds and
passionate words have been the inspiration for much of what I have written. Up
until now, I have chosen the path of maintenance. It is safer, and I have rationalized that
fighting the good fight for my little
microcosm of customers with a tremendous amount of guidance from the amazing
community that exists here on MND is good enough. But it
isn't enough. I want to fight a bigger
fight. Challenge the home value wrecking
forces that have decimated the neighborhoods of so many friends, neighbors and
family members and build an industry designed protective wall to guard against a similar
Next week I will begin outlining a
new mission that the industry can rally around, that I believe will show our
love and passion for the American homeowners that we serve every day. I've even come up with an acronym
for it: THRIVE (The Homeownership Return on
Investment Value Experiment).
I look forward to joining forces
with any and all of you, for a new industry driven mission.