Addressing the packed Broadway Ballroom at the Marriott Marquis in New York City, David Stevens, the president and chief executive officer of the Mortgage Bankers Association, spoke with passion as he told the attendees of the MBA’s National Secondary Market Conference that today’s housing policies are “failing the American homeowner.”

Stevens officially opened the conference with what has now become a tradition of calling out the broken housing finance system.

Stevens began his speech by noting that this year’s conference is the largest in ten years, a signal that the mortgage environment is improving. But Stevens noted that there’s still plenty more work to do, especially by those in Washington.

“Today the American Dream is in the penalty box, and the Justice Department and other enforcement agencies appear to be in the driver’s seat when it comes to the nation’s housing policy. Everyone working in the mortgage business feels like there is a giant target on their backs,” Stevens told the crowd.

“And the fact is consumers and the housing market would all be better served if the tone in D.C. changed,” Stevens continued. “The negative rhetoric and the enforcement environment are hurting everyone - homebuyers, lenders and the stewards of the nation’s economy. Housing policy is failing today.”

The main theme of Stevens’ speech was accountability, from not only the mortgage industry but from legislators as well.

“We have acknowledged and taken accountability for the role our industry played in actions that led to the meltdown. Lenders have paid hundreds of billions in settlements. We’ve also made tremendous change in controls, compliance, and to improve the consumer experience,” Stevens said.

“But now too, policymakers – the vast network at the federal and state level – must account for their role in the recovery,” Stevens said. “They must account for their role in credit access and consumer confidence. It’s time to acknowledge the flaws in policy, corrections needed to the rules, and the impacts of going too far.”

One area where Stevens sees a negative environment being created by regulators and legislators is the mortgage rate comparison tool created by the Consumer Financial Protection Bureau.

Stevens spoke out against the CFPB’s rate checker in January, saying he was disappointed in the CFPB for putting the tool, adding that if a lender did the same thing, it’d be considered rate baiting.

“It’s actually disappointing the bureau would put this out,” Stevens told HousingWire in January. “I’m not a CFPB knee jerk. They do a lot of good and while I think things can be improved, we’re on board with them. But this wasn’t well thought out.”

In his speech Monday, Stevens reiterated his issues with the rate checker tool. “I didn’t really care about the rate checker tool,” Stevens said Monday. “I didn’t think that anyone was actually going to use it. It was entirely inaccurate then and it still is, but it leads consumers to believe that the rates that we give them aren’t true.”

Stevens returned to his theme of accountability when discussing the message being sent by Washington.

“We acknowledged the role we played as an industry in the recession. As we set our sights on the pathway forward, regulators and enforcement agencies must own their role in the pace and path of recovery, especially who can achieve the American Dream and who can't,” Stevens said.

“Today’s environment is not encouraging credit expansion,” Stevens said. “It’s forcing lenders to be overly conservative - ultimately failing entry-level homeowners on every front.”

Stevens also spoke at length about the current enforcement environment and its impact on the housing industry.

“Let me be clear, rulemaking through enforcement is not rulemaking at all. Enforcement on a case-by-case basis becomes a guessing game for businesses to know if and when they may be penalized. It produces the most defensive lending posture that severely impairs access to credit,” Stevens said.

“This atmosphere of the unknown; this environment of fear and trepidation rather than an environment of constructive engagement and compliance, has a steep cost,” Stevens added. “It makes lenders much more conservative than they might otherwise be, keeping qualified borrowers from being able to obtain a home.”

Stevens listed three things Washington and the housing industry need to do truly heal the market.

First, Stevens said the dialogue must change. “We’re operating in the safest, soundest lending environment in decades. Consumers should feel confident in applying for loans and purchasing homes,” Stevens said.

“Policymakers should champion this environment and do a victory lap letting consumers know they are well protected and that they can trust the system,” Stevens said. “The dialogue of distrust must end. Regulators should understand the power that their message has over the mortgage market and just how their messages influence behavior.”

The second change that Stevens called for is adjustment to be made to the current lending rules.

“Federal officials should work with the industry and stakeholders to change the most problematic rules,” Stevens said. “Policymakers should utilize the industry as a partner, as an advisor. We are the ones who actually do the lending, but our hands are tied and the perception of the lack of trust remains.”

Stevens also said that the Qualified Mortgage rule itself doesn’t work as written and needs to be changed.

“The only reason QM is working today is because of the ‘GSE patch,’ without which we would be in a world of trouble. The hardwired 43% debt-to-income ratio is too high for some borrowers, and too low for others,” Steven said.

“Non-QM/non-agency loans are primarily going to the wealthier buyers. There is strength at the top end of the market for well-heeled borrowers seeking jumbo loans, but credit remains tight for first-time borrowers who often get lower-balance loans,” Stevens said. “This directly translates into strength at the high end of the market, while the entry-level buyers in most communities still lag behind.”

Stevens said that it’s time to recognize that QM does not work without the patch, which leaves lenders “beholden” to Fannie Mae and Freddie Mac’s underwriting systems as the hope for credit access.

Third, Stevens said that the questions surrounding the secondary market need to be resolved.

Stevens said that last week’s update into the single mortgage-backed security that is to be issued by both Fannie Mae and Freddie Mac is a step in the right direction.

“The single security will lead to more liquidity,” Stevens said. “The single security will lead to more confidence, better and more transparent data. Upfront risk share will lead to a broader risk share model that encourages more competition and brings more private capital back to the market.”

Stevens closed his remarks with a call to action for the MBA’s membership.

“Let’s change the tone from a dialogue of distrust to a dialogue of confidence. Let’s fix the rules to allow for innovative, sustainable, safe lending. Let’s end the relentless enforcement regimes,” Stevens said.

“Bring confidence back. Give us the confidence to provide access to credit to more qualified borrowers at the lower and middle-income levels,” Stevens continued. “Return private capital to the secondary mortgage market. Reignite the economic engine of the real estate market. This is our message and we need leaders to focus on this – confidence – as the single greatest threat to a more robust recovery that brings opportunity to so many more Americans.”