Broeksmit: Housing Finance Reform Entering Critical Phase

NEW YORK–Mortgage Bankers Association President & CEO Robert Broeksmit, CMB, said housing finance reform is “critically important” to the real estate finance industry, to consumers and the American economy.

“At MBA, we know the truth: the secondary market is of primary importance to millions of people,” Broeksmit said here yesterday at the MBA National Secondary Market Conference & Expo. “You ensure that families can get affordable mortgages, in communities large and small. You connect global sources of capital with Main Street, serving the needs of homeowners across the country. And ultimately, you make the entire economy stronger and more dynamic, benefitting every American, whether they know it or not.”

Broeksmit noted over his 34-year career in the industry, he gained valuable experience in secondary market issues. “I can assure you that we are fighting to make your jobs easier and you more successful,” he said. “When you succeed, America succeeds–and at MBA, we are your advocates in our nation’s capital.”

Broeksmit outlined a number of secondary market issues that serve as MBA priorities:

–Robust competition in the secondary market;

–Access to affordable credit for borrowers;

–Equitable access and level pricing for lenders of all sizes;

–Liquidity through the credit cycle;

–Reliable private capital that protects taxpayers; and

–An explicit guarantee for mortgage-backed securities backed by conventional loans.

“The Mortgage Bankers Association continues to be fully focused on housing finance reform,” Broeksmit said. “We’re pursuing every angle and pushing regulators and lawmakers to build on the progress that has already been made. More than 10 years after the financial crisis, we still believe housing finance reform is achievable.”

Broeksmit said Mark Calabria’s recent confirmation as Director of the Federal Housing Finance Agency gives MBA an opportunity to move the needle forward.

“Director Calabria is a pragmatic man who wants to make permanent progress after a decade of delays,” Broeksmit said. “You heard it in his hearings, I heard it in my private meetings with him…this is a man who knows the industry inside and out, and he’s committed to preserving what works and improving what doesn’t.”

Now that Calabria is on the job, Broeksmit said MBA is in regular contact with his office about housing finance reform. “We’ll continue to work with FHFA to enact regulations that align with our core principles,” he said.

In March, MBA led a coalition of more than two dozen groups to call on FHFA to pursue regulations that advance these reforms. MBA is also working with Treasury and HUD as they develop plans under President Trump’s Executive Memorandum on federal housing finance reform.

“Beyond administrative reform, we also seek legislation to address those issues that cannot be undertaken by federal agencies,” Broeksmit said. “The truth is that permanent housing finance reform requires action by Congress, as well. That’s why MBA continues to work with lawmakers on both sides of the aisle.”

Broeksmit noted he’s testified in front of Senate and House committees twice in recent months and met with Senate Banking Committee Chairman Mike Crapo, R-Idaho, and Ranking Member Sherrod Brown, D-Ohio, as well as House Financial Services Committee Chair Maxine Waters, D-Calif.

“These leaders have good reasons to get moving on reform before the end of this Congress,” Broeksmit said. “Senator Crapo’s chairmanship expires next year and he wants to get reform done first. In the House, [Waters] is a long-time advocate for affordable housing. She also has a track record of legislative achievement. Now, we’re not naïve about the hurdles we face. But we do believe that by continuing to work with the key players in Washington, we can be ready to help support legislation when the time is right.”

Broeksmit touched on a number of other secondary market issues, including:

HUD/FHA. Broeksmit said MBA is also working directly with lawmakers and regulators to make progress in improvements to certifications and default taxonomy recently proposed by HUD. “It’s a good start, and we’ll be submitting our own comments soon to suggest improvements,” he said. “We also look forward to a joint policy statement from HUD and DOJ concerning when the False Claims Act is an appropriate remedy and when it isn’t.”

UMBS. After years of work, Freddie Mac and Fannie Mae finally launch the Uniform Mortgage-Backed Security in less than two weeks (see related story in MBA Insights (

“MBA was one of the earliest advocates for this product, for good reason,” Broeksmit said. “Under the current system, Freddie Mac securities are less liquid than comparable securities issued by Fannie Mae, hurting investors and consumers alike. These issues will be directly addressed by the creation of a single, better product that is common to both GSEs.”

Broeksmit noted the final version of the UMBS adheres to MBA’s principles. “When it goes live in two weeks, the result will be a deeper market that should bring greater liquidity across the board,” he said. “And while we can’t spike the ball yet, we are very confident that this change will benefit the market over the long run.”

Self-Employed Mortgage Access Act. “This bill has bipartisan support in both the House and Senate for good reason,” Broeksmit said. “It would better allow lenders to qualify self-employed borrowers for QM loans outside of the GSEs or the government agencies. These individuals already have the ability to repay a mortgage, but because they’re self-employed and/or have non-traditional sources of income, they often don’t qualify for loans outside of the government-backed channels. They deserve better, and we’re committed to help them.”

QM Patch. Broeksmit noted he QM Patch is scheduled to expire in less than two years, and a new and improved standard is desperately needed. MBA is working with the Consumer Financial Protection Bureau for fixes to the current rule.

“We want to put private capital on a more level playing field with the GSEs,” Broeksmit said. “We all know the current system is flawed. While necessary at the time, the continued reliance on the Patch directs too much of the market to government-backed channels. It helps explain why we haven’t seen the return of a truly private MBS market at the level we would have hoped.”

Broeksmit said MBA is pushing for a rule that fixes two important problems: use of Appendix Q and cut-off of 43% as a maximum allowable debt-to-income ratio. “Unless these problems are fixed, we fear that many loans that qualify as QMs today will either move to FHA or not get made at all,” he said. “That’s not right and we will not let it happen. At the very least, if the Patch is to be extended temporarily, it should also be expanded to provide safe-harbor status to more private loans–including jumbo loans. Qualified consumers deserve more options and better prices on their mortgages. We will continue to work with the CFPB to make that happen and give consumers and investors the choices and freedom they deserve.”

MISMO. An important project is the ongoing effort to improve the efficiency of the market through the Mortgage Industry Standards Maintenance Organization. “We call MISMO the ‘language of lending,’ because it provides every part of the mortgage industry with a common platform to exchange information,” Broeksmit said. “Thanks to more than 20 years of hard work, MISMO standards lower the cost of working directly with other private institutions, the GSEs and government agencies. The benefits are many and tangible.”

MBA recently announced a $2 million additional investment in MISMO to support more rapid development of key standards critical to the industry’s path toward a more digital process.

“Among other things, this funding will help create a uniform dataset for private label mortgage-backed securities,” Broeksmit said. “Everyone here will benefit from these innovations. We created MISMO to help you and so I urge all of you to join. Get involved in helping to develop the standards and help our industry move faster, more efficiently. We want you to help us drive progress.”

Broeksmit said the next months will prove critical to the secondary mortgage market. “We’re fighting for you and we’re making progress at every turn,” he said. “With your continued support and leadership, I know we’ll achieve even more in the days ahead.”