Broeksmit: Industry Must Be Voice to Balance Risk, Regulation

CHICAGO–The real estate finance industry faces a daunting challenge to balance risk in a rapidly changing market. Here at the Mortgage Bankers Association’s Risk Management, QA and Fraud Prevention Forum, MBA President & CEO Robert Broeksmit, CMB, addressed these challenges and how MBA is helping its members meet them, summarizing a number of issues facing the industry:

Housing Finance Reform
Broeksmit said recent proposals from the Trump Administration (Treasury and HUD) lay out a roadmap for administrative and legislative reform of the government-sponsored enterprises, noting the proposals reflect a number of MBA priorities, such as a guarantee on mortgage-backed securities; multiple guarantors and new entrants into the secondary mortgage market; and a more level playing field for private capital.

Broeksmit called the negotiations over housing finance reform on Capitol Hill “a very complex, three-dimensional chess game,” but expressed confidence that “ultimately, we are going to bring it in for a smooth landing.”

“We have been the strongest and most consistent voice calling for the Federal Housing Finance Agency to lock in the positive reforms that have been instituted through conservatorship before the GSEs were privatized,” Broeksmit said. “We cannot let the good work that has taken place over the past decade go to waste. This approach also limits the work that needs to be done by Congress.”

QM Patch
“It’s critical that the Consumer Financial Protection Bureau reform the QM standard before the QM Patch expires in 16 months,” Broeksmit said. “Otherwise, we could see significant market disruption.”

Broeksmit said MBA is focused on solutions that are fairer–and less reliant on Fannie Mae and Freddie Mac–in the long term, while ensuring such market disruption does not occur in the near term (see article MBA Letters Address QM Patch, Ginnie Mae Stress Tests. )

FHA Certifications
Broeksmit said the “overreach” of the previous Administration with respect to penalizing FHA lenders under the False Claims Act had a chilling effect on many lenders’ willingness to participate in its programs. “MBA has been working for years to develop reasonable reforms that would ‘right-size’ FHA enforcement,” he said. “Bad actors would not be tolerated, while minor, immaterial errors would not be subject to draconian penalties.”

Broeksmit noted FHA has been listening. “Our persistence is finally paying off,” he said (see https://www.mba.org/mba-newslinks/2019/september/mba-newslink-monday-9-16-19/residential/mba-trade-groups-urge-fha-to-move-forward-on-certification-statements?_zs=WqkwB1&_zl=aupI5). “Substantial amendments to the certifications and the defect taxonomy have the potential to provide lenders with the clarity they need. We’re confident that we can help attract more players back to FHA lending.”

Ginnie Mae RFI
Broeksmit noted in recent months, Ginnie Mae has taken on a wide-ranging effort to update its counterparty risk management policies. “This decision makes sense, as Ginnie Mae’s issuer base looks very different today than it did a decade ago,” he said.

MBA’s efforts have focused on ensuring transparency and appropriate levels of oversight. MBA submitted a letter yesterday on the Ginnie Mae RFI. “Ginnie Mae has shown a refreshing willingness to work with us toward the shared goal of a healthy government lending market,” Broeksmit said.

Technology and Cybersecurity
Broeksmit said the industry’s efforts in addressing technology and cybersecurity should be done with the goal of balancing risk and reward.

“Those in the mortgage industry understand the importance of protecting their customers’ privacy and are acutely aware of their responsibility to protect information and ensure the data they collect is used for appropriate purposes,” Broeksmit said. “In order to balance the risk and reward, so that consumers may enjoy the convenience certain innovations provide, there must be parallel development of oversight and regulation to address the issues raised when technology is used. We can ensure responsible innovation without creating unnecessary barriers to widespread use.”

Broeksmit noted while MBA has had an Information Security workgroup for years, “we recognize that the severity of the threat continues to increase. We are going to devote more efforts and attention to help our members in this space through advocacy, education and information.”