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

by devteam September 17th, 2011 | Share

DavidrnH. Stevens, President and CEO of the Mortgage Bankers Association (MBA) told arnSenate hearing this week that MBA’srnmembers are concerned about the conflicting policy objectives that continue tornemanate from all involved stakeholders.   “This regulatory and legal ambiguity, he said,rn”is causing consumers to pay an uncertainty premium in the form of increasedrncosts and diminished access to credit.” </p

Stevens, speaking at a hearingrntitled “new Ideas for Refinancing and Restructuring Mortgage Loans” sponsoredrnby the Subcommittee on Housing, Transportation and Community Development saidrnthat his association recognizes that the public trust has been badly shaken andrnin order to affect change the industry must restore its credibility,rntransparency and integrity.  “We all know that there are many who sharernresponsibility for the mistakes that led us to this place, including mortgagernbankers and servicers.  However rather than pointing fingers, allrnstakeholders need to work together to stabilize and revitalize the housingrnindustry.” </p

MBA recently assembled a task force</bto look for housing market solutions by bringing private capital back to thernmarket.  The task force pointed to severalrnsteps that should be given priority.  First,rnassist the large numbers of borrowers who are unable to refinance and takernadvantage of record-low interest rates. rnRather than large scale mortgage refinance programs involving principalrnforgiveness and even further discounted interest rates, MBA suggests a morerncost efficient approach would be to merely adjust the guidelines of existingrnprograms.  </p

For example, policymakers shouldrnconsider reducing the GSEs’ loan level price adjustments on HARP-eligible loansrnwhich would reduce costs to borrowers where the GSEs already assume the creditrnrisk for the existing loan.  Streamliningrnappraisal and other requirements to reduce the time and expense of refinancingrnand raising HARP’s 1 LTV requirements would enable many otherwise qualified “underwater”rnborrowers to refinance.  Finally FHFArnshould expand eligibility for the HARP program to include loans originatedrnafter June 2009. </p

Another refinancing avenue worthrnconsidering, Stevens said, is a shared appreciation mortgage proposed by SenatorrnMenendez.  A lender would agree to reducernthe principal balance of a distressed borrower’s mortgage if the borrowerrnagreed to share any future increase in the home’s value with that lender.</p

Second, existing government programsrnshould be modified to support financing and availability for local investmentrnin rental housing, but individual sales and local investment alone cannot effectivelyrnreduce REO backlogs so MBA supports bulk investor sales of properties to quicklyrnpare down lender inventories.  Any largernscale programs should be simple, easy to administer, and attractive torninvestors.   While they must not bernoverly restrictive, such sales should include safeguards like investor screening,rnbuy and hold covenants, revenue sharing and rehabilitation incentives.  The GSEs should also consider a way forrninvestors to identify and aggregate REO properties.</p

Stevens said he believes it isrnimportant to remember that no part of the housing market operates inrnvacuum.  “Instead the housing market is a series of complex, butrninterdependent systems and well intentioned change may result in unintendedrnconsequences that could result in increased costs and diminished access torncredit for consumers.” 

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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