MBA’s Bob Broeksmit Testifies at House Hearing on Beneficial Basel III Re-proposal Recommendations for Real Estate Finance

MBA President and CEO Bob Broeksmit, CMB, testified at a legislative hearing titled, “Prioritizing Main Street: Evaluating the Impact of Capital Proposals on Economic Growth and American Communities,” before the House Financial Services Committee.

Hearing details can be found here. Click here for Broeksmit’s written statement.

Note: Please find Broeksmit’s prepared oral statement below. He may add to or subtract from these remarks during the course of his testimony. Portions of the text may be omitted during the testimony.

ORAL STATEMENT

Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association

4/28/2026

Vice-Chairman Huizenga, Ranking Member Waters, and members of the Committee – thank you for this opportunity to testify. I am Bob Broeksmit, President and CEO of the Mortgage Bankers Association, and a Certified Mortgage Banker with more than 40 years’ experience in the mortgage industry.

I want to step back from the technical language of risk weights and instead briefly tell you what these capital rules mean to a family buying or renting a home.

First, let me say clearly: the Agencies have listened. This new proposal is meaningfully better than the current bank capital framework AND the proposed revisions advanced in 2023 that would have caused serious disruption to both residential and commercial real estate markets.

Let me focus on three areas of the proposal where the details will have real consequences for real people.

When a bank originates a mortgage and sells it into the secondary market, it often retains the right to collect payments – the mortgage servicing asset, or MSA. That servicing right has value – and it’s a key component of how banks price new loans.

In 2013, under the first phase of Basel III, regulators raised the risk weight on MSAs from 100% to 250% with no empirical justification. In practical terms, this took the capital requirement on the value of mortgage servicing from 8 cents on the dollar to 20 cents on the dollar.

The result was predictable. Banks looked at that capital cost and walked away from mortgage servicing – with their share of single-family servicing falling from 88% in 2012 to 39% today. That’s not a market trend – that’s a regulatory outcome.

Here’s why that matters for borrowers. The value of a servicing right is a direct input into mortgage pricing. When banks are active and consistent buyers of servicing, that competition drives the value of the MSA – and every increase in servicing value translates directly into lower costs for the borrower at origination.

A 25-basis point increase in servicing value is a 25-basis point reduction in closing costs – that’s $1,000 in savings on a $400,000 loan. It’s not abstract. It goes right back into the borrower’s pocket.

MBA strongly supports reducing the MSA risk weight back to 100% and, as the agencies propose, eliminating the cap on MSAs that can be included in Tier 1 capital. Both changes are needed together.

Another paramount issue involves “warehouse” lines of credit – the short-term liquidity that allows independent mortgage banks – that originate more than 60% of U.S. home loans – to fund loans before selling them. Today, those warehouse lines carry a 100% risk weight.

Here’s the thing that defies logic: if a mortgage company fails to repay, the bank takes possession of the underlying mortgage note. At that point, the bank holds a whole loan – which carries a 50% risk weight.

I’ll say that again: under the current framework, the capital requirement is cut in half if the bank’s counterparty defaults. That is the only asset class I’m aware of where the bank is in a better capital position after its customer fails.

That’s not a rational risk framework – that’s an anomaly that needs to be corrected. The risk weight on warehouse lines should be aligned with the risk weight of the mortgages that collateralize them.

The third area I’d like to focus on is capital treatment of commercial and multifamily mortgages – the loans that build our communities. Banks are essential to this market – accounting for 38 percent of all commercial and multifamily mortgage debt outstanding.

And these loans are important to banks – being some of the best performing loans on bank balance sheets in recent decades. Regrettably, high capital charges have kept banks from playing their appropriate role in this market.

We support the structure and direction of changes regulators have proposed to address this – including basing the risk weights for commercial mortgages held by the largest banks on the loan-to-value ratios of the loans. Further fine tuning is needed.

We’re also urging the Agencies to give appropriate capital relief to essential community investment and rental housing tools such as multifamily loans and Low-Income Housing Tax Credit investments. The performance of these products has been strong and capital requirements should reflect that.

This proposal gives us a real opportunity to fashion capital requirements that reflect actual risk and provide more affordable mortgage and real estate-related credit to American families and communities. I’m happy to take your questions.