On Key Secondary Issues, Solutions Remain Elusive

NEW YORK–Regulatory reform, the future of Fannie Mae and Freddie Mac and the transition of the Federal Housing Finance Agency are three of the most critical issues right now–and play a defining role in future housing policy.

Speaking here at the Mortgage Bankers Association’s National Secondary Market Conference & Expo, a group of panelists provided insight into these issues, noting that solutions could be a long way off.

“The federal government’s role in the market is to serve markets that the private market does not,” said Gary Acosta, Co-Founder and CEO of the National Association of Hispanic Real Estate Professionals. “If the government is involved in markets in which the private market is involved, then they don’t understand their purpose.”

Bill Emerson, Vice Chairman of Rock Holdings, Detroit and former MBA Chairman, noted, “Until we get more private capital into the housing finance system, the government is going to remain involved. The government has had Fannie Mae and Freddie Mac in conservatorship for 10 years, and I don’t see that changing any time soon.”

Jaret Seiberg, Managing Director of Financial Services and Housing Policy with Cowen Washington Research Group, Washington, D.C., agreed. “Until someone or some entity steps forward, we’re going to see more of the same for some time to come,” he said.

“Coordination is essential for the housing finance system going forward,” said Pete Mills, MBA Senior Vice President of Residential Policy and Member Engagement. “The real challenges are in the ‘bright line’ issues, the roles of the GSEs going forward.”

Federal Housing Finance Agency Director Mel Watt’s term expires in early 2019, creating a political football, said John Hughes, Vice President of Federal Government Relations with USAA, Rockville, Md. “The November elections create several scenarios,” he said. “A potential Democratic Party-controlled Congress could put a lot of pressure on the Trump Administration to appoint someone palatable to everyone.”

“This administration doesn’t necessarily take calculated thought into its decision-making,” Acosta noted. “I believe the Trump Administration will pick someone to lead FHFA who follows the Administration’s ideological direction toward deregulation.”

Mills noted that MBA works with Administration officials closely. “Administration officials tend to evolve over their tenure,” he said. “We note those shifts and it’s our job [at MBA] to work with them and help shape their perspectives.”

Just as importantly, Emerson said, technology is going to shape the path of the industry’s future. “We as an industry are now ‘woke,'” he said. “The largest generation [Millennials] transact through technology; that isn’t going to change. The momentum is there, the momentum is coming and it bodes well for the housing industry–and that will benefit those who are ahead of the curve.”

“Those [lenders] who don’t embrace technology are going to be left behind,” Hughes agreed. “But in Washington, that raises questions as to whether technology will more effectively help lenders work with underserved populations.”

“We work with a lot of borrowers who have thinner credit files,” Acosta noted. “When we work on technology that is aimed at getting less friction in the market, there is a worry that we will leave more people out of the process, particularly those who don’t fit in conforming windows.”

“It’s all about how you use data,” Emerson said. “I think data will open more opportunities if you do it the right way. We have to look at how we can change, ‘the rules are the rules; the box is the box,’ and data can help us do that.”

Which brings it back to regulations, Mills noted. “We’re currently dealing with a dozen federal regulatory agencies, 50 different state and a number of local jurisdictions,” he said. “It’s a challenge for lenders working with all of these.”

Nowhere is deregulation more evident in the Trump Administration than at the Consumer Financial Protection Bureau-or, as Acting Director Mick Mulvaney has rebranded it, the Bureau of Consumer Financial Protection. Seiberg said lenders should continue to take a wait-and-see attitude.

“The industry has long asked for less ‘regulation by enforcement,’ and that’s a good thing,” Emerson said. “But now, what we’re seeing, is more aggression by states’ attorneys general, which raises issues of patchwork regulations.”

Emerson said anyone who works with state attorney generals have more work ahead of them. “At the end of the day, we look at the landscape, evaluate the landscape and figure out how to do business,” he said.