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Previewing MBA Annual Conference with David Stevens

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Banking, Conference Coverage
Tuesday, October 10, 2023

It’s less than a week away from the pinnacle event for U.S. mortgage professionals – the Mortgage Bankers Association’s (MBA) annual conference, MBA Annual 23, which is set to run Oct. 15-18 in Philadelphia.

To get a sense of what pressing topics to watch for during the event, Dodd Frank Update caught up with former MBA President and CEO David Stevens, currently serving as CEO of Mountain Lakes Consulting, Inc. Although Stevens will be away for a family occasion during the conference, he had plenty of insight to share.

Perhaps the top issue on the minds of mortgage lenders is interest rates and their impact on the mortgage marketplace, Stevens said, explaining that much of this is related to lingering effects of stimulus spending and significant inflation during and immediately after the height of the pandemic.

“The mortgage industry is in relative free-fall right now,” Stevens said. “There is concern about the major role the Federal Reserve played in creating the current mess by overreacting to the pandemic through too much stimulus spending and the purchasing of mortgage-backed securities (MBS), also called quantitative easing, in an effort to reduce rates and increase lending. Then, the Fed got out of the MBS market, creating a sort of vacuum for the rest of the marketplace. Had these things not taken place, the average price of a mortgage would likely be 100 basis points lower than it is today.”

To his point about rates, Stevens referred to a letter signed by MBA, the National Association of Home Builders, and the National Association of Realtors, urging the Fed to make the following two clear policy statements:

·        “The Fed does not contemplate further rate hikes; 

·        “The Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.”

Newly proposed Basel III rulemaking represents another major concern for the industry, Stevens said.

“The Basel III rule is a really painful rule because it applies much higher risk-weighted capital requirements on the large banks with over $100 billion in assets and doubles the risk-weighting for loans they issue,” Stevens explained. “Loans with low down payments already have really high risk-weighting and this further increases the prices of loans for first-time homebuyers and minority homebuyers.”

This is a topic Stevens expects multiple industry insiders to touch on during this year’s conference, given its massive implications for large mortgage lenders.

Thirdly, Stevens expects there to be a great deal of discussion about increased loan sampling related to the government-sponsored enterprises’ (GSEs) repurchasing activities. Mortgage lenders are concerned this change will cause more undue stress in the marketplace.

“The GSEs are sampling more loans and when they find any defect, they are making the lender buy it back,” Stevens said. “Lenders complain that, in many cases, these are performing loans and most of the defects come down to a difference of opinion in the underwriting.” 

Stevens offered an anecdote in which one self-employed borrower could have three different underwriters draft contract terms based on the same information and end up presenting three different calculations for data such as annual income.

“Banks are losing capital already and having to buy back mortgages on top of it just adds to their stress,” Stevens said. “It feels like a slap in the face because this goes against previous agreements between the industry and the GSEs.”

MBA Live attendees could witness announcements by Federal Housing Finance Agency (FHFA) Director Sandra Thompson regarding whether the FHFA will expand Federal Home Loan Bank (FHLB) membership to non-banks, as well as an update on proposed changes to the agency’s credit policy to utilize VantageScore ratings in addition to FICO.

Stevens acknowledged the recent increase in interest in artificial intelligence (AI) and its ability to aggregate data needed for loan applications and for determining underwriting requirements, but also noted it presents huge risks for fraud and theft – all of which are topics slated to be covered during the conference. The Consumer Financial Protection Bureau (CFPB) recently published guidance on the use of AI in mortgage lending decisions and CFPB Director Rohit Chopra is among the federal regulators slated to speak during the conference.

Dodd Frank Update will be in attendance for MBA Live. Follow our coverage in real-time via X, formerly Twitter, (@DoddFrankUpdate) and on LinkedIn.

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