Leaders of the Mortgage Bankers Association issued a direct challenge to federal regulators at the opening session of the 101st Annual MBA Convention & Expo Monday, calling for an end to the severe penalties, unclear compliance standards and conflicting regulations that are hamstringing the industry and the larger economy.
"As an industry, we've proven we need to be regulated. However, the regulatory avalanche of today's Washington isn't working and we are seeing the results in today's marketplace," Bill Cosgrove, MBA chairman, said. "We all need to come back to center — policy makers, regulators, consumer groups and our industry — to achieve a healthy balance that the American economy desperately needs."
The answer, according to MBA leaders, is to open access to credit and stop punishing lenders.
"To really turn this housing market around, federal regulators and enforcement officers must understand the collective impacts of the new rules and severe enforcement penalties," Cosgrove said. "If they're going to regulate us, they must work to better understand the unintended consequences on consumers."
Those consequences, according to the MBA, include credit standards that cut out too many potential homeowners, especially first-time borrowers who can no longer get access to FHA loans.
"FHA-insured loans have always been the bedrock for first-time homeownership. But in the 12 months ending in June of this year, FHA purchase loans fell 18.5%," Cosgrove said. "Let me make this as clear as I can — the future of housing in America is on the line."
David Stevens, president and CEO of MBA, was just as forceful.
"I'm disappointed with the lack of progress," Stevens said of President Obama's administration's slowness to address the suffocating regulation. Stevens called on Obama to change the dialogue on housing from one of distrust to "a dialogue of confidence."
Addressing the Consumer Financial Protection Bureau's approach, Stevens said, "Enforcement should be the exception to the rule, not the rule itself."
The MBA leaders expressed hope that recent comments by Mel Watt, director of the Federal Housing Finance Agency, and Julián Castro, secretary of the U.S. Department of Housing and Urban Development, on expanding the credit box and partnering with lenders, will result in real change to housing finance regulation.
"Director Watt said he wanted to partner with lenders," Stevens said. "We need to help Watt be wildly successful."
Cosgrove hailed Castro's goal to make the Federal Housing Administration "a strong provider of opportunity" for first-time homebuyers, but said the regulators must give lenders clarity on compliance.
MBA leaders cited their success working with legislators and regulators to pass a safe harbor component to the qualified mortgage rule, and the MBA's continued focus on the overall economy as the industry's strongest appeal for change.
"Let me be clear — any lender that colors outside the lines of federal regulations should be held accountable," Cosgrove said.
"But today's lenders are paying many times over for mistakes that may have been out of their control. And it's the consumer who pays the ultimate price. It's time for the penalty phase to end."