By: David H. Stevens
President and CEO at Mortgage Bankers Association
Some big news from Consumer Reports was released this week– consumer confidence is up and they are ready to open their wallets again. “Our nationally representative study of 1,006 Americans shows that people are now in the market for homes, cars, and appliances—and that they plan to shell out even more money in the coming year.” One of the most promising statistics is that one in four millennials told Consumer Reports they’re ready to buy a home.
Unfortunately, mortgage originations aren’t showing much progress and the mortgage market still isn’t recovering like we want it to. For much of the past year, the jumbo portion of the market was the only sector showing real strength. Conforming and government borrowers were facing higher costs, and the new regulations were more likely to impact smaller loans. However, the market can’t function on jumbo sales alone. First-time and move-up buyers are needed to keep the whole housing market operating. Instead of housing being a catalyst for economic recovery, housing is actually holding recovery back.
Everyone says, “Lenders should make credit more accessible to borrowers.” It’s just not that simple. Nobody wants to return to the days of free flowing credit where so many families were hurt by unsustainable lending practices. Look where that got us. However, today’s regulatory environment is complex (see slide below) with numerous federal agencies, overlapping jurisdictions, and intersecting federal rules. Until lenders receive more transparency on what constitutes a mistake or may force a repurchase, their fear of enforcement, reputation risk and penalties will keep access to credit tight.
The good news is that policymakers are having the right discussions to fix the rules in order to maintain consumer protection, but also allow qualified families access to the credit they need for a home. White House officials recently met with lenders from all over the country – small, community and large lenders – to better understand the constraints which prevent lenders from serving more communities.
Many economists, policymakers, industry experts and consumers advocates agree that homeownership leads to greater wealth. A recent Bloomberg story quoted Yana Miles of the Center for Responsible Lending as saying, “A lack of homeownership leads to a lack of wealth building. When you own and have a responsible mortgage, you’re building equity in your home and you have a stable payment every month, so you can save, focus your finances elsewhere and pass wealth to your children.”
Consumers are ready to buy homes again, as Consumer Reports notes that 12% of the respondents said they had either bought a home in the past year or plan to in the coming year. They want to provide stable, secure homes for their families; and so does the real estate finance industry. Working with policymakers to fix the rules, we can provide qualified borrowers the credit they need to once again make the dream of homeownership a reality.