IMBs: The Very Definition of ‘Skin in the Game’

SAN FRANCISCO–Independent mortgage banks represent more than three-fourths of Mortgage Bankers Association membership, a fact that MBA 2015 Chairman Bill Cosgrove, CMB, CEO of Union Home Mortgage Corp., Strongsville, Ohio, said is not lost on the association.

“MBA continues to be the one voice for us IMBs in Washington,” Cosgrove, driving force behind creation of the MBA Independent Mortgage Bankers Conference, said here yesterday. “We’ve made incredible progress, and we still have so much to do.”

MBA President and CEO Robert Broeksmit, CMB, told participants that the dedication and commitment to communities is at the heart of IMB and community bank lending. So when misinformation is generated about nonbank lending–information that could affect how policymakers and regulators think–MBA works tirelessly to correct the record and ensure IMBs are not disadvantaged based on a faulty view of the market.

“You may operate differently than depositories, but that doesn’t mean you operate with less compliance, less structure, or fewer policies and procedures,” Broeksmit said. “Most IMBs are privately-held companies, owned and operated by a single individual or small number of owners whose personal net worth is fully invested in the company. This is the very definition of ‘skin in the game.'”

Broeksmit said some media coverage confuses market share with systemic risk. “The fact that nonbank lenders originating a large volume of loans does not itself correlate to a systemic risk,” he said. “Quite the opposite, actually. The deconcentrated origination and servicing across a much broader number of smaller, more diverse counterparties. This actually good for the system. It reduces systemic risk. It reduces concentration risk.”

Today, Broeksmit said, the mortgage lending environment is “safer and more sustainable than ever. We work closely with policymakers to ensure the proper balance of consumer protection, access to credit, and competition in the market.”

Independent mortgage companies play an “indispensable role” in the housing market, Broeksmit said. “The fact is that without independent and non-depository companies stepping up in the years after the Great Recession–as some big banks and other lenders pulled back–credit would have been tight and home sales and prices would have recovered at a snail’s pace,” he said. “Additionally, think of the many first-time buyers, military members and veterans, low- and moderate-income borrowers, and minority households that would still find themselves locked out of homeownership.”

Broeksmit said MBA recognized the negative impacts of the government shutdown on not only furloughed government employees, but also borrowers. “It’s tremendously disruptive, and frankly scary, not knowing when you are going to get paid next, or whether you will be able to pay your bills,” he said.

MBA continually worked to ensure policymakers understand how the shutdown impacted customers, citing the association’s work in getting FEMA to reverse its decision to halt the issuance of new and renewal flood insurance policies; getting the GSEs to make it clear that mortgage servicers do not have to report borrowers’ payment information to the credit bureaus if the servicer makes accommodations to those affected by the shutdown,
thereby preventing unfair deterioration in consumers’ credit scores; and working with the IRS in resuming its IVES system in order to protect borrowers from delayed or cancelled closings.

Since coming on board in August, Broeksmit has engaged in a “listening tour,” visiting with members to ascertain their concerns.

“Here’s the number one recurring theme I’m hearing from our members, especially the IMBs: what can MBA do to help lower my cost of producing or servicing a loan?” Broeksmit said. “Our plan is this: working for you for reasonable changes to the regulations and laws that are increasing costs or preventing you from doing business. We’re addressing the regulation by enforcement regime that has permeated the [Consumer Financial Protection Bureau]. We’re helping to refine Dodd-Frank-era rules by working with the CFPB to act in ways that both protect consumers and facilitate consumer choice.”

For example, Broeksmit said, when the CFPB issued a series of requests for input, on how they could better meet their objectives, MBA asked for written guidance that provides clarification to help facilitate compliance; and any changes to the rules to be made through the formal rulemaking process. “Working with our members, MBA sent more than 140 pages of detailed responses,” he said.

“I’ve spoken several times with CFPB Director Kathy Kraninger, and Loan Originator Compensation was the one issue we talked about most,” Broeksmit said. “We are urging the Bureau to modify the LO comp rule to help your companies be able to better compete when consumers are shopping and to make sure you can effectively participate in bond programs that open the door to homeownership for so many. You told MBA this was their number one priority, and we’re on it.”

On housing finance reform, Broeksmit said, MBA focuses on core policy principles such as ensuring competition and a level playing field for all lenders, regardless of size or business model; preserving the critical mission of key housing finance programs–FHA, VA, Ginnie Mae, USDA and the GSEs; an explicit government guarantee on mortgage backed securities issued by the GSEs; and restoring the PLS market in a responsible manner so IMBs can compete and sell to private investors.

“The GSEs continue to play a vital role in the marketplace and in your business,” Broeksmit said. “The changes implemented during conservatorship have leveled the playing field and enabled more equal access to the secondary market. But these reforms are not etched in stone. The GSEs’ long-term ability to support the housing market greatly depends on permanently reforming some of the structural problems that contributed to the crisis.”

MBA is also leading efforts to address serial refinancing of VA loans,” Broeksmit said. “Loan churning is absolutely unacceptable, and we are committed to bringing it to an end,” he said.

Broeksmit said it is “critically important” that we collectively remain engaged on all fronts,” he said. “We need you with us, connecting with and educating a new Congress. We need you with us, working with regulators in reshaping policies so your customers and the industry are better served. The power of our collective engagement and your continued service to our industry will make u”

MBA Chairman Christopher George, President and CEO of CMG Financial, San Ramon, Calif., noted IMBs account for the vast majority of mortgage loans. “In some ways, we are victims of our own success,” he said. “We stepped up when others didn’t. If the small business is the backbone of America, then the independent mortgage banker is the heartbeat.”