With home sales on the rise, foreclosure inventory shrinking and the Mortgage Bankers Association Secondary Conference witnessing their largest amount of attendees to-date, all signs seem to point to a positive market recovery.
However, the MBA cautioned on Monday that when industry experts take off their rose-colored glasses, many challenges and risks still remain in the housing market, particularly a lack of leadership on Capitol Hill, regarding the future of the industry.
"Research shows that the higher end of the market is fueling our growth while the lower end is shrinking and as a result, access to credit is not universal," said Debra Still, chairman of the MBA and president and CEO of Pulte Mortgage.
Lenders are far more cautious than ever before due to the pending finalization of the Qualified Residential Mortgage Standard, uncertainty surrounding the finalization of Basel III and the daily policy changes issued by the Federal Housing Finance Agency, Fannie Mae and Freddie Mac.
"The government’s role in housing is far too large with more than 90% of all loans backed by the government. We need private capital back in the market," Still urged.
As a result, a call to action by the MBA as well as market experts has been made in order for regulators to understand the urgency for private capital to make a play back into the market.
David Stevens, CEO and president of the MBA, told attendees that the biggest challenge faced today is an absence of leadership in regards to the future of the government-sponsored enterprises and government reform.
"This is not okay. This is not acceptable for the prosperity of consumers, our industry or our economy. This must change, and it cannot be done through death by 1,000 cuts," he said.
Three critical components are attributing to the GSEs’ success: the unilateral power to raise guarantee fees, huge refinance volumes driven by the Home Affordable Refinance Program and the Federal Reserve’s continued commitment to the purchase of mortgage-backed securities.
"But we are currently stuck in Washington limbo. We need leadership, coordination and transparency for successful transition," Stevens noted.
To face issues of tight credit standards, lender uncertainty and government reform head on, Stevens outlined a series of non-legislative steps to transition the market into a non-enterprise state.
The components include demanding that the White House name a housing policy coordinator.
Additionally, Stevens wants absolute transparency and as a result, the MBA and a variety of consumer groups are planning to send a letter to Ed DeMarco, acting director of the FHFA, demanding to allow industry feedback into the agency’s proposed policy changes.
Finally, there must be a clear transition out of conservatorship.
"To achieve this goal, we must move toward a single security, encourage additional risk sharing by mandating Fannie and Freddie to accept lower guarantee fees for deeper credit enhancements, and redirect the FHFA platform initiative," Stevens concluded.