New York, NY – May 2, 2011 – (RealEstateRama) — “Thank you. As the new president and CEO of the Mortgage Bankers Association, it is my pleasure to welcome you to our ‘National Secondary Market Conference.’ Looking out over the audience, I recognize so many of you, and I cannot think of a better way to start my job at MBA than being here with you. I look forward to seeing you over the next several days and am interested in hearing your thoughts about the challenges we face. And, I want to publicly acknowledge our Chairman, Michael Berman. His leadership and passion have made such a difference. He has been working tirelessly traveling across the country to ensure the messages of this industry’s key issues are heard.
Our industry has faced so many issues over the past few years. I know, first hand, that it has not been easy on anyone. The mortgage finance industry has received a black eye — in some ways, of our own making. While there is enough blame to go around, at the end of the day, we must hold ourselves accountable for what happens within our own industry. We helped create this situation; we must help clean it up. And we will clean it up!
I accepted this position with eagerness because I know this industry can and will recover and be stronger. As my predecessor, John Courson, knows, whose guidance in this transition has been invaluable, this is a sometimes difficult job. But, I firmly embrace the principle that housing is a basic human need, one which a good and just society works to enable, and so I am a strong believer in this industry and ready to see it achieve greatness.
While we are an industry in flux, with several bad years under our belt and some challenges ahead, our overall long-term prospects are excellent. Just look at the data: For example, while delinquency and foreclosure rates remain high, they are clearly trending down. In fact, total delinquencies have been falling ever since their all-time high in the first quarter of 2010. Thirty-day delinquencies, which peaked in the first quarter of 2009, are now at pre-recession levels. Overall, 39 states have foreclosure start rates below the national average. And even those states in the worst shape, California and Florida, saw a slight decrease in the share of their loans in foreclosure. In other words, things are starting to look up.
As Winston Churchill famously said, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
Having started in this industry at a similar time of negatives, back in the early 1980s when everything was in a free fall except interest rates, I am comfortable with periods of transformation. From my first day as a loan officer until my last job as commissioner of the Federal Housing Administration, I have experienced all aspects of this industry, and done so during moments of great change.
To me, a transformative period is one that offers great opportunity. We may face many challenges, but with the correct attitude and involvement, it is possible to not only write our own destiny, but also the nation’s. After all, the American dream has been made from housing, and this will always be true.
It is not just that housing is a large portion of our Gross Domestic Product, and no matter how jittery some have felt, it is hard to forget the dream of a owning a home. While rental housing plays an important role in our economy, we will always be a nation where sustainable homeownership is a linchpin of society. So both our economy, and individuals and families across the country, have a stake in the future of our industry, just as we have a stake in their future.
For that reason, it is important for our industry to acknowledge a few critical facts:
First, as I have said, we must hold ourselves accountable for the role we played. Without dismissing the roles that others played, we must admit that some within the industry gave loans to borrowers that shouldn’t have, and ignored or excused the presence of unethical people and misplaced incentives. Acknowledging these mistakes is the first step in rebuilding trust. Without trust, our industry is nothing; and by trust, I mean the ability of both those from within and outside our industry to have faith in our products and our actions. From borrowers to regulators to legislators, we must prove that we are an industry that instills confidence. Therefore, I plan to work tirelessly to ensure we are taking a leadership position to rebuild trust and confidence in mortgage lending.
Second, we must do a better job of articulating our reason for being. The public no longer seems to understand what we do, or why it is important. In fact, for many first-time homebuyers, we may have scared them a bit, so they are sitting on the sidelines wondering if homeownership is the right decision for them. It is time for us to return to our core business and ethics.
It is my goal to launch an extensive grassroots awareness campaign to highlight how we support homeownership and lower costs for homebuyers, through direct financing and through the secondary market. And make the case that perhaps not everyone is ready to own a home, so an ample supply of rental housing is also critical to building a more stable society. Reminding the public that all this is an investment in the future, and the present; that having people feel connected to their homes helps reduce crime, strengthen schools, and stabilize communities; and creates that community in the first place.
Part of this increased awareness will be focused on important groups within Washington. Ever since the housing market collapse, the financial center of our world has moved from New York City to Washington, DC.
The fact is, many policy makers in Washington and in states across the country have intervened in an effort to control and protect against dangers that they feel were not addressed by industry leaders. We must ensure that rational policy making balances market and consumer protection with the recognition that a functioning distributed mortgage finance market is one of the things that made the United States so great. We need to reach out and make sure our message is understood. Our housing system and its large, liquid finance system that includes private sector participants combined with a right sized guaranteed securities market is essential to American families.
This means that our industry must increase our focus on policy makers in Washington, upon those who in many ways hold our future in their hands. We must continue to inform and educate. We must participate in the debates and discussion. We cannot ignore this priority at this critical time. And to do so successfully, we must speak with one voice.
Having worked in Washington, I can assure you that Members of Congress, regulators, and the Administration, as well as their staff, have limited time to listen: a single, strong voice is the only way to command an important role in decisions that are made.
Nearly 100 years old, the Mortgage Bankers Association is the oldest trade organization with extensive experience in Washington, DC, as well as the long, institutional knowledge of the industry, the financial system, and, most important, how potential policy changes will impact what we do. We represent every sector of the industry, and therefore, we offer a greater base and strategic advantage.
Small, niche trade organizations are important, but they do not have the reach or breadth to represent the entire industry – and it is the entire industry that is under attack. Now is not the time to fight turf wars or splinter our power. And, we must strengthen our bond with other large trade groups – the Realtors and Homebuilders – and consumer advocacy groups – all who also represent important segments of this industry to ensure the issues we are facing and the solutions we are proposing are heard with one very loud industry voice. As Benjamin Franklin said at our nation’s founding, “We must, indeed, all hang together, or assuredly we shall all hang separately.”
It is incumbent upon our industry to provide the insight necessary to assist the Administration and Members of Congress, especially considering there is no shortage of policy challenges: from the future of FHA and Ginnie Mae to the reform of the secondary mortgage market to a re-examination of the housing incentives in our tax code, to many more. We presently have a golden opportunity to help lead the way, and create a positive result. It is why having lenders speak as one through the MBA is so critical.
We want to ensure a safe, regulated but also functioning real estate finance system, one that works for everyone — especially the families for whom the system exists in the first place. Federal law can sometimes be a blunt instrument, and often does not allow for much nuance, making it inherently imperfect. These imperfections impact not just the industry involved, but also American families who depend on our industry for their housing needs. We must always be relentless in articulating the impacts of unintended consequences that may result from a given policy decision.
Certainly unintended consequences played a role in our current challenges. Past regulations at times were unclear, incomplete, improperly applied – or not applied at all. No one should ignore the lessons of the collapse, which means that our industry as a whole must remember to practice safe and sound underwriting and to listen to borrowers to ensure their needs are met. This is the way to a new future.
Third, while many of you have had some good originations years recently, simply by virtue of low rates and the volume of refinances occurring, refinances do not necessarily create communities, or, for that matter, a successful long-term business model. This is not only unsustainable due to commonsense –there are only so many refis– but also because of the hard truth that interest rates are rising, and will likely continue to rise. When interest rates go up, which we predict over the next 12 months, this refi market will continue to shrink. According to the MBA Forecast, for 2012 the refinance share will drop to 26 percent; down significantly from 66 percent in 2010 and 37 percent in 2011. For the sake of our future, we must look fundamentally at our industry as a whole. And, as you look to the impacts of moving back to a purchase market environment, I am committed to making certain the MBA’s educational programs are ready to meet the dynamic and ever changing needs of the industry.
I believe that our best years are still ahead of us. I would argue it is far more realistic to be optimistic than those who are focusing only on the negatives.
I am positive the future is bright. I recognize there are several years left of pain and hard work for our industry, both as individual businesses and overall. The same is true for our country and its citizens.
Yet at the end of the day, we are resilient. As a nation, our spirit has sustained us during difficult times, and today is no different. As the French thinker Alexis de Tocqueville commented more than a century and a half ago, “The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.”
This must be our motto in our industry right now. We have the ability to repair our faults, and to help further the greatness of America and our industry. For making right our mistakes is not just the right thing to do, it is also the path to even greater successes in the future.
Certainly from a demographic point of view, the statistical trends on housing are upward. Consider the so-called Echo Boom, also known as Generation Y or the Millennials. These are the children of Baby Boomers, born between the mid 1970s to the early 2000s, totaling nearly 80 million strong. Larger than the Baby Boom cohort, this group is anywhere from two to three times the size of Generation X.
With this generation now coming of homeownership age there is a huge potential market for new home purchases. This means that with the right effort and outreach, we will soon be faced with burgeoning demand for new mortgages and new financing.
If we can put our own house in order, we will be ready to put their houses in order. After all, one of the greatest recent lessons is of sustainable housing: of owning a home because it is appropriate and makes sense. Previously, too many jumped into homeownership when they either should not have at all, or should not have on such a grand scale. So the Echo Boom Generation is an opportunity where we can “make things right” in terms of sustainable housing, and, most importantly, an opportunity that we cannot afford to squander.
Simply put: we cannot accept the status quo or be unprepared for doing business in a dynamic new marketplace. The present might appear stable, but if we sit back, we will allow our industry to be shaped without us. We must participate, and do so as one, to ensure we are in control of our industry’s destiny. If we want to not only survive into the future, but also thrive, we must look ahead.
Seizing the day and opportunity means addressing all of the issues in front of us. It means acknowledging our failures, rebuilding trust with our borrowers, fundamentally scrutinizing our industry, fixing what has been done wrong, carefully debating regulatory and legislative proposals, and, most importantly, speaking with one voice.
Our industry has been through many ups and downs. We have played a critical role in America’s progress over the last century. We have much to be proud of, and a great legacy to reclaim.
The Mortgage Bankers Association is already at the forefront of staking this claim. We have spent years building our reputation as an organization dedicated to promoting fair and ethical practices, and professional excellence; one that values the homeowners who provide our reason for existence, as well as the businesses who make up our membership; an organization that has learned to navigate the corridors of power as well as the corridors of home. I hope you will join me as we work to ensure that the future for our industry is the best it may be.”
[Please Note: These are prepared remarks. David H. Stevens may add or subtract from these remarks during the course of his presentation.]
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org.