To whom it may concern:
As President-elect Donald Trump and his team begin the arduous task of transitioning, it is important that as he addresses his long list of campaign promises he does not forget housing. This is a plea for this administration not to underestimate the importance of the housing and real estate industry to America’s economy.
To date, I have heard very little discussion of substance about the housing and mortgage industry at the national level. I submit to you, as someone who has held political appointments, worked within and outside of “The Beltway” and enjoyed a lengthy career in many different aspects of real estate: the dialogue on the future of our industry must start at the very top.
We can all agree that housing and real estate is one of the largest sectors of the United States economy. The numbers tell us that housing’s combined contribution to Gross Domestic Product averages roughly 15% – 18%. From construction to building materials; mortgage lending to valuation and appraisal; real estate investment to mortgage brokerage; do-it-yourselfers, and the supplies and tools to all of the market segments that bring the home-buying transaction to fruition (title insurance, loan underwriting, home inspection), the housing and real estate industry employs millions of Americans, produces billions of dollars in goods and services and, in many ways, is considered to be a bellwether of our overall economy. When people can’t afford housing, chances are excellent that our economy is somewhat stagnant.
Today, the housing and real estate industry — especially with regard to mortgage origination — continues to suffer from the black eye dealt by the “subprime meltdown” of 2007 and the subsequent “Great Recession.” Some of that blame was earned by members of our industry. Some was unfairly apportioned. But the fact remains that “Main Street” continues to view our industry with a wary eye.
In some ways, we invite this suspicion. We could stand to be more transparent. We could be more conciliatory where mistakes are made. We could do more to perfect the economic “backstops” which failed us in 2007. In many ways, it’s easy to perceive our industry as one that operates in a very selfish way.
However, our industry is also one that drives the American economy. While the home purchase transaction is certainly done for commercial purposes —ours is not a venture of non-profit — it is also an emotional occurrence. Few other “goods” in our economy inspire people as much as homeownership. Housing and real estate-related businesses employ millions with good jobs.
Millions more in supporting or ancillary industries benefit from the demand for goods and services created with each housing start or renovation project. And the stories reporting the many instances of generosity and compassion throughout the housing industry are out there — they’re just not reported very often.
Love it or hate it, housing will remain an engine to America’s economy. The need for housing — be it homeownership or rental — isn’t going away any time soon. But we have some massive issues that must be addressed without delay:
1. GSE reform
As it stands, two of the most important catalysts for the mortgage sector (Freddie Mac and Fannie Mae) exist in an unsustainable state. Both entities are operating with ridiculously low levels of reserves, even though both entities are generating a significant amount of revenue. That revenue, for the most part, is being rerouted into the U.S. Treasury. It sets a dangerous precedent and positions us for another economic crisis like that of 2007. I urge the Trump administration to address this with a thoughtful and long-term solution. Ed Demarco, Michael Bright and, to some degree, I have provided concrete options for GSE reform to be considered.
2. Modernization of process and addressing excessive regulation
Perhaps because we are so highly regulated, ours is an industry that puts far too little capital into research and innovation. This is likely why, even though we’ve taken large steps to upgrade the way we do business in recent years, we are still inefficient in many ways, leading to a transaction process that is likely the most complicated an American consumer will ever undertake.
I call upon our next Administration to encourage modernization and innovation for the benefit of the mortgage industry to better serve the consumer. Some of this will likely require more thoughtful regulation and support from the CFPB. Right now, the housing and real estate industry is hunkered down, spending millions of dollars and endless man hours interpreting piles of new regulation and finding solutions to stay compliant. Businesses that are focused inwardly are usually the last to innovate. It’s time for the federal government to support industry innovation in addition to its focus on compliance.
And while it is certainly time for the industry to focus on innovation to better serve the current consumer base, we must also realize that the next generation of consumer will have higher expectations of our industry. It’s my hope that this next generation of homebuyers will force the market in this direction as well.
It is way past the time for our industry leadership to stop kicking the proverbial can down the road. No matter what steps are or are not taken at the federal level, the housing industry is cyclical. Sooner or later, housing will face another “down cycle.” This in and of itself is a perfectly natural nuance in any free market (even a highly regulated free market).
However, if some of the most pressing issues facing the housing industry are not addressed comprehensively and thoughtfully, the problems of the real estate industry could easily, once again, become the problems of the American economy.
Hon. Joseph Murin
Chairman, JJAM Financial Services
President, Government National Mortgage Association (2008 – 2009)