Industry and Regulatory Landscape
September 2013
Pete Mills – SVP Residential Policy MBA
Mike Fratantoni – MISMO President, VP Single Family Research MBA
Moderator - Rick Hill – AVP Industry Technology MBA
Presented by
David H. Stevens
President, Mortgage Bankers Association
Outlook for 2013 and 2014
2012
2013
2014
GDP Growth
1.8%
1.7%
2.5%
Inflation
1.9%
2.1%
1.9%
Unemployment
8.1%
7.5%
7.0%
Fed Funds
0.1%
0.2%
0.2%
10-year Treasury
1.8%
2.3%
3.0%
30-year Mortgage
3.7%
4.1%
4.9%
Refi originations ($ B)
1,247
973
388
Purchase originations ($B)
503
619
703
New Home sales (thousand)
364
465
493
4,634
5,070
5,362
Existing home Sales (thousand)
Source: MBA August 2013 Forecast
Rate Forecast
History and MBA Forecast
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2010 - Q1
2011 - Q1
2012 - Q1
Mortgage Rate
Source: MBA August 2013 Forecast
2013 - Q1
2014 - Q1
10-year Treasury Yield
Estimated Originations 1990 to 2014: SF Market
Source: MBA – August 2013 Mortgage Finance Forecast
Net Production Income (basis points)
Orig Vol
500
Net Production Income (bps)
Avg Firm Origination Volume ($M)
400
300
200
100
20
33
66
58
82
107
120
107
86
75
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Source: MBA’s Quarterly Mortgage Bankers Performance Report
0
($M)
2013: The Year of Implementation
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Final DFA Mortgage Rules Issued in 2014:
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Ability to Repay/Qualified Mortgage
HOEPA/High Cost Mortgage Loans
Loan Officer Compensation Rule
National Servicing Standards (2 Rules: RESPA & TILA)
Escrow Rule
ECOA Appraisal Disclosure Rule
Appraisals for High Risk Mortgages Rule
4250 + Pages of FINAL Rules…

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plus proposed rules, small entity compliance guides,
Official and unofficial guidance,
…but still many uncertainties
…and there is more to come

Risk Retention/QRM

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RESPA-TILA Integrated Disclosures


Just re-proposed (505 pages)
Expected late 2013, with implementation by ???
HMDA Amendments

Expected late 2013…significant expansion, implementation by ???

Anti-Steering Rules

Ongoing GSE Strategic Alignment and FHA Program Changes

State laws (e.g., CAHBOR)

And more?

CFPB has authority to issue rules to address “risks to consumers” it identifies
without waiting for Congress to act.
Implementation Challenges

The systems, programming and training challenges are
unprecedented…

…and so are the risks of getting it wrong – legal, regulatory and
reputational

Implementation time frame remains incredibly compressed

Will lenders, servicers and vendors be ready?


CFPB says supervision and enforcement will be “measured”…
But what about the AGs? The plaintiffs bar?
Impact: the Known and the Unknown

Biggest Known Impacts

QM/QRM: Define the Credit Box in near-term, possibly the long-term



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National Servicing Standards:

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
Combined with QM: Further Impairs on Broker Channel? Rise of Mini Corr
Uncertainty: Industry remains cautious, risk taking remains constrained


Sharply higher costs of servicing, esp. for small servicers
Reconsolidation of Market
LO Comp Rule:


Fed Data: 20% + of purchase mortgages > 43% DTI
Fees and Points Cap: Small Loan impact
Implications for LMI, Minority Borrowers
Fed 2012 HMDA Report on current credit conditions: “…almost no risk-taking
in the [conventional] mortgage market in the aftermath of the financial crisis.”
Biggest Unknowns


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QM: Availability and Cost of Non-Safe Harbor Lending, Non QMs
Implementation: Can we do it?
Enforcement? CFPB, AGs and Plaintiffs Bar
Cumulative Impact of Regulation
Points & Fees
Basel III
QM
LO Comp
QRM
Eminent
Domain
Risks to
Recovery
Rule Making
&
Compliance
GSE
Reform
Debate
Disparate
Impact
Lo
Licensing
FHA
False Claims &
Enforcement
The Fed
& QE
Cumulative Impact on Industry/Consumer
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Community Based Lenders
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Large Lenders
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Community banks, Independent Mortgage Banks (IMBs): Too small to survive?
Will Costs become prohibitive? (especially on a per unit basis)
Re-aggregation of Market? (especially with respect to servicing)
Implications for competitiveness, ability of market to expand/contract…
Higher costs: impact on relative returns on mortgage vs. other business lines
Reputational risks of mortgage lending and servicing?
Consumers

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Uncertainty = Tightened “Credit Box” in Near Term
Reduced Competition if lenders leave or reduce their mortgage lending
Constrained Product Innovation
Fewer Choices
Cost of Credit will rise, but by how much?
Contact Information & MBA Resources
Rick Hill
Associate Vice President, Industry Technology
rhill@mba.org
(202) 557-2718
MBA Homepage:
www.mba.org
MBA Research Page:
www.mba.org/research
Research Institute for Housing America:
http://www.housingamerica.org
MISMO:
www.mismo.org
Thank You to our 2013 Fall Summit Event Sponsor