MBA Bob Broeksmit Speech at 2024 Secondary and Capital Markets Conference and Expo

MBA’s President and CEO Bob Broeksmit, CMB, delivered the following remarks at the 2024 Secondary and Capital Markets Conference and Expo:

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Good morning! It’s great to be together again. And it’s always a privilege to be with the leaders who undergird the American economy. 

On behalf of the Mortgage Bankers Association, thank you for your membership. And on behalf of a grateful country, thank you for doing so much good for so many people. 

We’re here to help you to contribute even more to our country. We want the secondary and capital markets to flourish and benefit even more families, from all walks of life. 

But that vision is getting harder to achieve. That’s not your fault. In fact, you’re doing everything you can, and frankly, your efforts are heroic. You’ve made it possible for more than 65% of American households to own their homes. Every day, you expand the American Dream. 

But instead of helping you, the federal government is tying your hands. It sometimes feels like it is attacking you directly, and injuring the Americans you serve. I will address this crisis today. But I don’t just want to lay out the problem. I want to provide a practical solution. And I want you to know: The MBA is fighting tirelessly—for your sake, and for the American people.  

At its core, my argument is a call for collaboration. The MBA is committed to working with regulators and lawmakers to benefit Americans. And we know from experience that collaboration gets results.  

A good example is the progress we’re making on trigger leads. I don’t have to tell you that trigger leads are a nuisance to consumers. We want to end that nuisance and protect people’s privacy.  

To that end, MBA has developed the Homebuyer Privacy Protection Act. This federal legislation would severely curtail trigger leads. Consumers would only be contacted by companies they know, including their lender, their servicer, and their depository institutions. This simple reform would mean consumers get contacted only a handful of times—not hundreds of times, like the status quo. 

We’ve partnered with lawmakers on both sides of the aisle to introduce this bill in the House and Senate. And we’ve already secured 31 co-sponsors for the Senate bill and more than 40 on the House side. We’re pushing to pass it as soon as possible, because that’s what homeowners need and deserve.  

Our work with Congress shows collaboration at its best. Yet when it comes to regulatory agencies, working together is increasingly difficult. I’m not just talking about differences of opinion and priorities, which certainly exist. I’m talking more about the bureaucracy’s enormous growth, which has created a dangerous system of confusing and contradictory mandates.  

Put simply, Washington, D.C. is tying us in “regulatory knots.” As these knots grow tighter, they restrict our industry and the millions of people we serve. They’re the real victims here—and they’re who we are trying to help. 

This regulatory crisis has been building for years. After the Great Recession, MBA put together a chart of the various federal agencies and laws that govern housing policy. It wasn’t pretty. The chart showed the regulatory knots that were already forming, and they were bad even then. 

I recently asked my team to update that chart. You can see it on the screen behind me. Suffice it to say, the regulatory knot is more confusing than ever, and it’s still getting worse. New regulations are rolling out at a breakneck pace with little regard for how they affect each other, much less the American people.  

The CFPB is at the center of many knots. In March, the bureau suddenly announced in a blog post that it would soon target what it called “junk fees” in mortgage closing costs. It declared that such fees drive up costs unreasonably, while asking consumers to submit complaints. The CFPB may be planning to force lenders to absorb these costs. 

But here’s the thing: These fees they’re targeting? By the White House’s own definition, none of them are junk fees. And many are for services required by other federal agencies. 

According to the White House, a junk fee isn’t disclosed to consumers. But everything the CFPB mentioned is thoroughly disclosed early in the loan process. And in a supreme irony, these fees are disclosed because of CFPB regulations, on forms designed by the CFPB itself. If these are “junk fees,” then the word JUNK has no meaning.  

But there’s another, more important problem. What the CFPB calls “junk fees,” federal agencies call mandatory. They pay for services like appraisals, credit reports, and flood certifications. Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, and the USDA can’t guarantee a mortgage without these things, for good reason. They provide tangible benefits to borrowers and protect taxpayers. But now the CFPB is attacking them. 

It gets worse. The CFPB’s campaign began a day after President Biden floated a proposal to scrap title insurance. But again, clear title protects borrowers, lenders, and investors and is required by Fannie and Freddie before they purchase a loan.  

Such confusion poses a serious threat to a smoothly functioning and sustainable market. And even if it’s just a political stunt, it betrays a lack of knowledge about a critical part of our economy. Blog posts and the bully pulpit are no substitute for real, thoughtful, informed regulation. We need commonsense rules of the road. We don’t need regulators to build the car as they drive it at a hundred miles an hour. 

I wish that were the only example, but it’s not. The Biden administration is tying more regulatory knots with the so-called Basel III end-game proposal. 

 Consider how Basel would affect low-to-middle income lending. It raises risk weights on specific kinds of mortgages, particularly low downpayment loans. That inevitably means fewer loans will be made, and the loans that are made will be more expensive. 

 This directly conflicts with the Biden Administration’s attempts to encourage precisely this type of lending. They’re also trying to revise the Community Reinvestment Act to encourage more low- and middle-income homeownership. Well, which is it? Do we want more lending to these communities, or less? This is the definition of a regulatory knot. 

 Basel’s treatment of mortgage servicing rights exacerbates the problem. It reduces the amount of servicing a bank may have on its balance sheet, compounding an absurdly high 250% risk weight that has already driven many banks out of mortgage lending and servicing. Going further would weaken the entire market for MSRs, driving up costs for borrowers. While one part of D.C. is trying to untie the knot, another part is making it tighter. 

 Finally, Basel raises capital requirements on warehouse lending—the lifeblood of independent mortgage banks. This will reduce the liquidity available to independent mortgage banks and make it more expensive, and the cost will be passed on to borrowers. Yet IMBs do the vast majority of lending to low- and moderate-income and first-time homebuyers.  

Once again, that directly conflicts with a key Biden administration goal. The federal government is trying to lower costs for consumers and improve housing affordability, and it wants to ensure financial stability. Yet Basel III will make housing less affordable, not more. How are we supposed to untie this knot? 

 Basel III will destabilize the housing finance market by pushing banks even further away from mortgages. To fill the vacuum, independent mortgage banks will step up and do more lending. But even there, the Biden administration is tying yet another knot. 

 FSOC, the Financial Stability Oversight Council, a group of federal regulators including the Treasury Secretary and the Director of the CFPB, issued a report last week that, for all intents and purposes, called on Congress and state regulators to increase oversight and capital requirements on IMBs.  It’s essentially doing to them what Basel III does to banks. If this bad idea moves forward, who will be left to lend? 

 No one works harder than independent mortgage banks to serve homebuyers. They originate about two-thirds of mortgages. And they’re especially important for underserved communities. IMBs are the primary source of credit for VA loans for veterans, FHA loans for first-time and low-income homebuyers, and RHS loans for rural families. And most minority homebuyers are served by an IMB. 

The Biden administration frequently talks about making homebuying more equitable. Yet with Basel III, it’s going to worsen inequities and push homes out of reach for millions of people. The contradiction is astounding.  

I’m even more surprised at how we got here. After decades of drafting housing regulations, our regulators have now outsourced a key part of the job to Europe by trying to push through the Basel Committee’s European-style capital regulation here in the U.S.  

Why on earth would we let European bureaucrats call America’s shots? Their housing market looks completely different. They don’t have mortgage servicing rights. They don’t have our culture of homeownership. And they definitely don’t have a pre-payable 30-year fixed-rate mortgage—the crown jewel of the American system.  

The last thing we should do is let them write the rules that govern us, layering their red tape on top of our own. If we go down that road, we’ll create a regulatory knot so tight, it can never be unraveled.  

Let’s take a step back and look at the consequences.  

Mortgage companies are constantly being whipsawed. They’re trying to understand the competing and contradictory rules that govern them. You are spending more than ever on regulatory compliance. But that leaves less money to spend on innovation, customer service, and actual lending. None of this helps the millions of Americans who want to buy homes.  

But there’s another, more insidious harm. As the regulatory knots tighten, consumer trust in the mortgage industry falls. Take the allegded junk fees that I mentioned. The CFPB is telling consumers that lenders are out to get them. In fact, lenders are following the law. Ditto the regulations that raise costs while limiting options. They give the impression that the mortgage industry is sticking it to consumers. But the true fault lies with the bureaucracy, not business. 

We all know the mortgage industry made mistakes in the past. Consumer trust plummeted as a result. Thankfully, in the wake of the Great Recession, the combination of industry action and prudent regulation helped restore that trust. We proved during the pandemic that we come through when the American people need us most, delivering historic volumes of low-rate purchase and refinance loans and helping more than 8 million families enter and then exit forbearance while retaining their homes. 

We’re now living in a new era of economic uncertainty and demographic change. The country desperately needs the mortgage industry to help future generations achieve the American Dream. Regulators should be fostering more trust in mortgage professionals. Instead, they’re turning people against the help they need to achieve their future. 

This isn’t just a problem. It’s a crisis—and we have to address it immediately. It’s in that spirit that I’ll now turn to a solution. 

These regulatory knots exist because no one can untangle them. There are so many agencies issuing so many rules, that the buck doesn’t stop anywhere. But it should stop somewhere—and it should stop with someone. That’s why I’m proposing a “National Housing Policy Director.”   

This position would bring order to the chaos. The Housing Director would oversee every housing policy, no matter which agency it comes from. They could spot contradictory rules from a mile away. Ultimately, the Housing Director would stop agencies from making regulatory knots worse, and start the long overdue process of unraveling them. 

I fully understand that even with such a position, different presidents would continue to pursue different policies, some of which may be less than ideal. But that’s far preferable to the current system.  

A Housing Director is a basic matter of good government. And there’s precedent. The Director of National Intelligence was created two decades ago to address similar concerns. At the time, in the wake of September 11^th, the intelligence community was overseen by fragmented and often competing agencies. The Director now makes them work together, ultimately strengthening national security.  

We need the same kind of streamlined, collaborative, and commonsense leadership in the housing market. The current approach is clearly failing the American people. The costs are too high, and so are the stakes. We need to encourage a new era of safety, trust, and innovation, not continue this slouch toward stagnation and discontent.  

Your companies are more than ready to lead the way. Now it’s time we had the leadership in government to match. 

Thank you.