MBA’s Stevens: Refinancing Guidelines should be Eased, Bulk Sales Encouraged


H. Stevens, President and CEO of the Mortgage Bankers Association (MBA) told a
Senate hearing this week that MBA’s
members are concerned
about the conflicting policy objectives that continue to
emanate from all involved stakeholders.   “This regulatory and legal ambiguity, he said,
“is causing consumers to pay an uncertainty premium in the form of increased
costs and diminished access to credit.”

Stevens, speaking at a hearing
titled “new Ideas for Refinancing and Restructuring Mortgage Loans” sponsored
by the Subcommittee on Housing, Transportation and Community Development said
that his association recognizes that the public trust has been badly shaken and
in order to affect change the industry must restore its credibility,
transparency and integrity.  “We all know that there are many who share
responsibility for the mistakes that led us to this place, including mortgage
bankers and servicers.  However rather than pointing fingers, all
stakeholders need to work together to stabilize and revitalize the housing

MBA recently assembled a task force
to look for housing market solutions by bringing private capital back to the
market.  The task force pointed to several
steps that should be given priority.  First,
assist the large numbers of borrowers who are unable to refinance and take
advantage of record-low interest rates. 
Rather than large scale mortgage refinance programs involving principal
forgiveness and even further discounted interest rates, MBA suggests a more
cost efficient approach would be to merely adjust the guidelines of existing

For example, policymakers should
consider reducing the GSEs’ loan level price adjustments on HARP-eligible loans
which would reduce costs to borrowers where the GSEs already assume the credit
risk for the existing loan.  Streamlining
appraisal and other requirements to reduce the time and expense of refinancing
and raising HARP’s 1 LTV requirements would enable many otherwise qualified “underwater”
borrowers to refinance.  Finally FHFA
should expand eligibility for the HARP program to include loans originated
after June 2009. 

Another refinancing avenue worth
considering, Stevens said, is a shared appreciation mortgage proposed by Senator
Menendez.  A lender would agree to reduce
the principal balance of a distressed borrower’s mortgage if the borrower
agreed to share any future increase in the home’s value with that lender.

Second, existing government programs
should be modified to support financing and availability for local investment
in rental housing, but individual sales and local investment alone cannot effectively
reduce REO backlogs so MBA supports bulk investor sales of properties to quickly
pare down lender inventories.  Any large
scale programs should be simple, easy to administer, and attractive to
investors.   While they must not be
overly restrictive, such sales should include safeguards like investor screening,
buy and hold covenants, revenue sharing and rehabilitation incentives.  The GSEs should also consider a way for
investors to identify and aggregate REO properties.

Stevens said he believes it is
important to remember that no part of the housing market operates in
.  “Instead the housing market is a series of complex, but
interdependent systems and well intentioned change may result in unintended
consequences that could result in increased costs and diminished access to
credit for consumers.” 

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