The market is rocky, margins are tight. And the grind may not end anytime soon, Mortgage Bankers Association President and CEO Bob Broeksmit told attendees in a fiery speech at the trade group’s annual conference this week in Philadelphia.
“Normally, I talk about the remarkable work you did over the previous year. Then I look at what we did on your behalf – the battles we fought and the victories we achieved. I close by reviewing what lies ahead – the policies we’re shaping, and the progress we hope to make,” Broeksmit said. “My tone is usually positive and upbeat. But not this year. I’m not upbeat. Frankly, I’m upset.”
Though MBA members have driven efficiencies to keep their head above the water and serve American families, there’s an enemy, he told them.
“While you’re fighting to survive, and while we’re fighting for you, Washington, D.C. is fighting against you. At a time when you and your customers need relief, you’re at risk of being hit with the most extreme overregulation. At a time when you desperately need stability, your own government is sowing the seeds of profound instability. Honestly, Washington is pushing you and our economy in the wrong direction. And no one will suffer more than American families – especially minority, low-income, and first-time homebuyers. This madness must stop before it’s too late.”
With that, Broeksmit rattled off a number of grievances against foes the Beltway.
Mortgage rates
On the day Broeksmit addressed the crowd in Philadelphia, mortgage rates were north of 7.7% on a standard 30-year fixed-rate mortgage. Mortgage applications are at multi-decade lows, and housing inventory remains highly depressed, helping push home prices up.
The MBA, alongside several other trade groups, sent a letter to lawmakers and monetary policymakers that the government can do much more to help the housing industry while still fighting inflation. The Fed, for example, could buy mortgage-backed securities.
Housing trade groups urged Fed Chair Jerome Powell to make two clear statements — that the Fed does not contemplate further rate hikes, and the Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.
These steps will provide the market greater certainty about the Fed’s rate path and its plans for the MBS portfolio and reduce volatility for traders and investors, the organizations noted.
“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the letter read.
Spreads are widening for other, (theoretically) more controllable reasons, Broeksmit said.
“Fiscal policy and political dysfunction are contributing – the debt limit crisis, growing federal deficits, and gridlock on Capitol Hill that results in near-miss (or actual) government shutdowns. MBA is shouting this truth from the rooftops in Washington. And we’re playing offense.”
BASEL III, SIFI
Broeksmit said the so-called Basel III end-game proposal “is dangerous too.”
He said that the proposed new capital increases for banks “are a dagger aimed at the heart of the housing market.”
He added: “Washington wants banks to significantly hike the capital they hold against mortgage assets. Not just mortgages, but servicing. And warehouse lines. If this goes through, banks will pull back even further from mortgage lending and servicing, leaving consumers with less access to credit.”
The MBA’s CEO said it’s “almost like Washington wants fewer people buying homes,” and said the new capital requirements would not help close the racial homeownership gap or benefit first-time homebuyers, especially in low- and middle-income families.
“Basel III is a solution in search of a problem,” he concluded. “And it will create far more problems than it ever solves.”
He spared no venom for the Treasury Department, whose Financial Stability Oversight Council is threatening to designate non-banks as systemically important, and therefore subjecting them to even greater regulatory scrutiny.
“Put another way, they want to strangle IMBs with endless red tape,” he said. “Once again, the result will be fewer businesses lending to fewer borrowers, leading to less homeownership for those who need it. A policy of this magnitude deserves the strongest possible justification. Yet FSOC provided precisely none. It gave no proof that non-banks are systemically important. It just says so, as if the assertion is proof enough.”
MBA’s coalition-building
Broeksmit highlighted some of the group’s advocacy work over the past year, including killing the controversial adverse market refinance fee and the much-maligned DTI-based loan level price adjustments to GSE loans.
“And while this fight is even bigger, we’re shifting into overdrive,” he said. “The MBA is building diverse coalitions to take your message nationwide. We’re partnering with the NAACP and the Urban League to make clear that the Basel proposal will move the cause of equity in the wrong direction. And we’re fostering unprecedented collaboration with other industries and associations. Every day, we talk to the decision-makers at the White House and leaders in Congress. And I can already report that there’s broad and bipartisan agreement that change is needed.”
While the MBA will continue to advocate, Broeksmit called on members to be their own advocates, too.
“Policymakers don’t just need to hear just from us right now. They need to hear directly from you…With your continued partnership, we can defeat these threats. And if we keep standing together and speaking as one, we’ll come through this difficult time. We won’t just survive. We’ll rise by helping more Americans thrive – because that’s what you always do.”