Broeksmit Explains How to Untie ‘The Regulatory Knot’: #MBASecondary
NEW YORK–Last week, MBA President and CEO Bob Broeksmit, CMB, suggested a national “housing czar” would bring order to the web of federal agencies and policies that affect housing. On Monday he explained further how to untie the current regulatory knot.
Speaking here at MBA’s Secondary and Capital Markets Conference and Expo, Broeksmit called for collaboration. “The MBA is committed to working with regulators and lawmakers to benefit Americans. And we know from experience that collaboration gets results,” he said. “A good example is the progress we’re making on trigger leads. I don’t have to tell you that trigger leads are a nuisance to consumers. We want to end that nuisance and protect people’s privacy.”
“To that end, MBA has developed the Homebuyer Privacy Protection Act,” Broeksmit said. “This federal legislation would severely curtail trigger leads. Consumers would only be contacted by companies they know, including their lender, their servicer, and their depository institutions. This simple reform would mean consumers get contacted only a handful of times—not hundreds of times, like the status quo.”
The Mortgage Bankers Association has partnered with lawmakers on both sides of the aisle to introduce the Homebuyer Privacy Protection Act in the House and Senate and has secured 31 co-sponsors for the Senate bill and more than 40 on the House side, Broeksmit noted.
“Our work with Congress shows collaboration at its best,” Broeksmit said. “Yet when it comes to regulatory agencies, working together is increasingly difficult. I’m not just talking about differences of opinion and priorities, which certainly exist. I’m talking more about the bureaucracy’s enormous growth, which has created a dangerous system of confusing and contradictory mandates. Put simply, Washington, D.C. is tying us in ‘regulatory knots.’ As these knots grow tighter, they restrict our industry and the millions of people we serve. They’re the real victims here—and they’re who we are trying to help.”
The CFPB is at the center of many knots, Broeksmit noted. “In March, the Bureau suddenly announced in a blog post that it would soon target what it called ‘junk fees’ in mortgage closing costs. It declared that such fees drive up costs unreasonably, while asking consumers to submit complaints. The CFPB may be planning to force lenders to absorb these costs. But here’s the thing: These fees they’re targeting? By the White House’s own definition, none of them are junk fees. And many are for services required by other federal agencies.”
The White House defines a junk fee as one that is not disclosed to consumers. “But everything the CFPB mentioned is thoroughly disclosed early in the loan process,” Broeksmit added. “And in a supreme irony, these fees are disclosed because of CFPB regulations, on forms designed by the CFPB itself. If these are ‘junk fees,’ then the word junk has no meaning.”
But there’s another, more important problem: “What the CFPB calls ‘junk fees,’ federal agencies call ‘mandatory’,” Broeksmit said. “They pay for services like appraisals, credit reports, and flood certifications. Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, and the USDA can’t guarantee a mortgage without these things, for good reason. They provide tangible benefits to borrowers and protect taxpayers. But now the CFPB is attacking them.”
Broeksmit added that the Biden administration is tying moreregulatory knots with the so-called Basel III end-game proposal. “Consider how Basel would affect low-to-middle income lending. It raises risk weights on specific kinds of mortgages, particularly low downpayment loans. That inevitably means fewer loans will be made, and the loans that are made will be more expensive,” he said. “This directly conflicts with the Biden Administration’s attempts to encourage precisely this type of lending. They’re also trying to revise the Community Reinvestment Act to encourage more low- and middle-income homeownership. Well, which is it? Do we want more lending to these communities, or less? This is the definition of a regulatory knot.”
Basel raises capital requirements on warehouse lending, which is the lifeblood of independent mortgage banks, Broeksmit noted. “This will reduce the liquidity available to independent mortgage banks and make it more expensive, and the cost will be passed on to borrowers…Once again, that directly conflicts with a key Biden administration goal. The federal government is trying to lower costs for consumers and improve housing affordability, and it wants to ensure financial stability. Yet Basel III will make housing less affordable, not more. How are we supposed to untie this knot?”.
Broeksmit said mortgage companies are trying to understand the competing and contradictory rules that govern them. But as the regulatory knots tighten, there is another, more insidious harm. “Consumer trust in the mortgage industry falls,” he said. “Take the alleged junk fees that I mentioned. The CFPB is telling consumers that lenders are out to get them. In fact, lenders are following the law. Ditto the regulations that raise costs while limiting options. They give the impression that the mortgage industry is sticking it to consumers. But the true fault lies with the bureaucracy, not business.”
We’re living in a new era of economic uncertainty and demographic change, Broeksmit noted. The country desperately needs the mortgage industry to help future generations achieve the American Dream. Regulators should be fostering more trust in mortgage professionals. Instead, they’re turning people against the help they need to achieve their future.
“This isn’t just a problem. It’s a crisis—and we have to address it immediately,” Broeksmit said. “It’s in that spirit that I’ll now turn to a solution. These regulatory knots exist because no one can untangle them. There are so many agencies issuing so many rules, that the buck doesn’t stop anywhere. But it should stop somewhere—and it should stop with someone. That’s why I’m proposing a “National Housing Policy Director.”
This position would bring order to the chaos, Broeksmit said. The Housing Director would oversee every housing policy, no matter which agency it comes from. They could spot contradictory rules from a mile away. Ultimately, the Housing Director would stop agencies from making regulatory knots worse, and start the long overdue process of unraveling them.
“I fully understand that even with such a position, different presidents would continue to pursue different policies, some of which may be less than ideal. But that’s far preferable to the current system,” Broeksmit said.
A National Housing Director is a basic matter of good government, Broeksmit added. “And there’s precedent,” he said. “The Director of National Intelligence was created two decades ago to address similar concerns. At the time, in the wake of September 11th, the intelligence community was overseen by fragmented and often competing agencies. The Director now makes them work together, ultimately strengthening national security. We need the same kind of streamlined, collaborative, and commonsense leadership in the housing market. The current approach is clearly failing the American people. The costs are too high, and so are the stakes. We need to encourage a new era of safety, trust, and innovation, not continue this slouch toward stagnation and discontent.”
“Your companies are more than ready to lead the way,” Broeksmit said. “Now it’s time we had the leadership in government to match.”
