Interview with David Stevens, President & CEO, Mortgage Bankers Association
Tell us a little about yourself.
My name is David Stevens and I’m President and CEO of the Mortgage Bankers Association (MBA).
Prior to assuming this position, I served as the Assistant Secretary for Housing and Federal Housing Commissioner at the U.S. Department of Housing and Urban Development (HUD).
I have more than 30 years of experience -- my entire adult life -- in mortgage finance and have held several executive level positions in sales, acquisition, investment, risk management and regulatory oversight, including positions in senior management with Wells Fargo, Freddie Mac, World Savings, and Long and Foster Companies.
What does it mean to be President of the Mortgage Bankers Association?
I get to lead an association that is the preeminent voice of the real estate finance industry.
Our industry is a critical access point for the American Dream, which means owning a safe and affordable home. Our industry also facilitates the construction of workforce affordable rental housing, and the office buildings, hospitals, retail and industries sites where Americans works.
At MBA, we represent the best interests all lenders and consumers.
No other entity has the access to the White House, Capitol Hill, FHFA, FHA, CFPB and other regulators like we do. Our credibility in Washington exists today because we represent the entire real estate finance community.
We pull strength from the broad diversity of our membership, by bringing them together, one voice with one vision on behalf of a vibrant and sustainable real estate finance system.
Take us through your typical day.
For the head of a trade association, particularly one representing as diverse and robust an industry as real estate finance, no two days are alike.
I spend my days talking to MBA members, meeting with Congressmen and key policymakers on Capitol Hill, speaking to regulators on behalf of our members, talking to the press, and even helping pull together major conferences.
Prior to your role with the MBA, you served as Commissioner at the FHA, appointed by the White House in 2009. The FHA was rapidly losing money at that time and your leadership helped to stop those losses and shore up the agency. What were some of the important internal debates your team faced at that time?
There were many things we did during my time as FHA Commissioner.
For example, we worked with Congress to establish the Office of Risk Management, the first ever created within HUD. It also established the first ever Chief Risk Officer in the history of FHA.
The Chief Risk Officer is an independent overseer of credit and counterparty risk, and acts as a second set of eyes to advise the Commissioner on risks that might otherwise go unidentified.
Also, as I chaired the Mortgagee Review Board, we terminated the approvals of just under 2,000 lending institutions around the country during my two years there.
Most of these were done through the annual certification non-renewals. But, there were many we did through suspension and debarment for fraud and other infractions. The most pronounced was when we suspended Taylor, Bean & Whitaker, in a coordinated effort with other enforcement agencies.
Of course, their CEO now sits in prison.
We made adjustments to credit policy. If a borrower had a credit score below 580, he or she had to put a 10% down payment in your mortgage as a minimum.
Prior to that a borrower could take 3.5% downpayment all the way down to a credit score of 500.
This significantly improved the credit quality of the mortgage.
On the other side, I’d like to note that we didn’t make the credit score floor higher than 580 because we were very conscious about access to credit and the impact to select demographics and communities.
The recession hit some communities, including lower income communities and minority communities, particularly hard. We drew the line at 580 rather than a higher number because we did not want to cut off access completely for a large segment of those whom it was our mission to serve.
Of course, lenders put overlays in place above us regardless.
The big internal debate we faced at the time was the challenge between protecting the quality of the FHA portfolio and making moves between premium increases and credit policy changes with responsible access to credit.
If you go into my conference room next door to my office, you’ll see a framed piece of legislation, with a pen given to me by President Obama that signed into law FHA’s ability to raise premiums above what was previously a set cap.
That legislation expanding that cap was a broad effort, getting through Congress with near unanimous support.
It was a significant bipartisan bill in the Obama Administration and it’s one that I’m very proud we were able to get done.
While at the FHA, you raised FHA mortgage insurance premiums multiple times to bolster the agency's portfolio, but never increased the program's minimum downpayment requirement from 3.5%. Take us through your thinking.
It’s very simple. Premiums offset the credit risk of the portfolio by bringing in revenue and can help offset exposure to forecasted default losses.
In our analysis, that had more of an impact than raising the downpayment from 3.5% to 5%. So the simple math is a part of the answer.
But the more important part of the answer is this: downpayments are the single biggest barrier to access for homeownership.
I knew that by raising the minimum downpayment from 3.5% to 5% we’d be barring access to homeownership, again, for the same kind of communities and individuals FHA was created to serve.
In August 2014, you spoke out against credit overlays, stating that such overlays limit access to mortgage credit. Has the situation improved much in the last 12 months?
We are still seeing credit too tight on the lower end of the market.
The reality is that most lenders still fear prosecutorial retribution if loans were to go bad. Until we have coordination among all the regulators in Washington including for example, CFPB, DOJ, Treasury, HUD, FHFA, FHA, we can expect lenders to be reticent to lend, and to impose overlays.
What are some of the MBA's key policy initiatives for 2016?
The mortgage industry continues to deal with a host of complex policy challenges.
The regulations that have come out as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, have completely restructured the housing finance system.
So, our mission at MBA is to help strengthen the overall system by protecting consumers while at the same broadening access to credit for borrowers.
Right now, credit has loosened on the high end but remains tight for lower income borrowers. As I said, lenders remain fearful of federal regulators and there doesn’t seem to be any coordination or clear guidelines set forth by them.
This is something we at MBA see as one of our clear priorities.
Beyond that, I think housing remains one of the least discussed issues in this presidential election and, yet, it’s one of the most important.
I am actually involved with the J. Ronald Terwilliger Foundation for Housing America’s Families, which has a goal of making housing one of the main priorities in the 2016 presidential election.
Former Senator Scott Brown and former HUD Secretary Henry Cisneros are both involved with the foundation. We plan on meeting with various presidential candidates to discuss this issue and, hopefully, elevating it to one of their main priorities.
What’s your outlook for U.S. mortgage rates over the next five years?
In general, we can expect rates to increase as the economy recovers.
In recent quarters, global risks such as the Greek debt crisis, the possibility of its economic effect spreading to other European countries, and the slide in the Chinese stock market have kept U.S. longer term rates lower than many predicted based upon the fundamentals of the economy.
However, MBA’s economists predict the increasingly stronger job market and somewhat higher levels of inflation will lead the Fed to hike in September of this year.
We expect that mortgage rates will hit 4.5 percent by the end of the year.
It is important to note that the positive of the stronger job market will outweigh any negative of somewhat higher mortgage rates, and that the purchase market will grow significantly. MBA estimates a total of $1.36 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014.
Purchase originations will drive the increase, increasing to $801 billion in 2015 from $638 billion in 2014. Refinances are expected to be to $551 billion in 2015.
For 2016, we expect $885 billion in purchase originations.
However, rates will likely continue to rise and cause refinances to decline to $379 billion for a total of $1.26 trillion in origination volume in 2016.
What are some of your favorite destinations for real estate and housing market news?
I read a variety of news outlets.
Our own internal publication, MBA Newslink, has nice roundup of all the major real estate finance news of the day.
I also follow a lot of industry leaders, analysts, and reporters on Twitter and LinkedIn to stay up-to-the-minute on what’s being talked about in the industry.
I could list all the publications I follow, but I’m sure I would forget someone.
The fact is that today’s online and social media environment means I don’t miss much of what is written, good or bad.
David Stevens is President and CEO of the Mortgage Bankers Association (MBA). Prior to assuming this position, Dave served as the Assistant Secretary for Housing and Federal Housing Commissioner at the U.S. Department of Housing and Urban Development (HUD).
Dave has more than 30 years of experience in mortgage finance and has held several executive level positions in sales, acquisition, investment, risk management and regulatory oversight, including positions in senior management with Wells Fargo, Freddie Mac and World Savings. Prior to his appointment by the Obama Administration to serve at HUD, Dave was President and COO of the Long and Foster Companies.
He is known inside the beltway as a key housing influential; serving as an industry authority on major mortgage finance legislative and regulatory issues. Dave is often quoted in the national media and regularly appears trade media on issues affecting the mortgage and housing markets.
In 2013, Dave received the National Association of Hispanic Real Estate Professionals (NAHREP) Founders Award, presented to individuals that have distinguished themselves by their work in support of sustainable Hispanic homeownership to improve the quality of life for Hispanics in America. He has been named to Bloomberg’s “50 Most Powerful People in Real Estate” list.
He currently serves on the Hope Loan Port board of directors, the board of MBA Opens Doors Foundation, MBA’s national 501(c) 3 nonprofit organization for philanthropic ventures, and as an advisory board member of the newly formed J. Ronald Terwilliger Foundation for Housing America’s Families.
Dave is a graduate of the University of Colorado, Boulder.
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