Opinion

Protecting a Fair, Equitable and Stable Residential Lending System

U.S. leaders are saddled with a critical responsibility, to steer the nation through a grave public health and economic crisis. On the list of vital policies for our lawmakers to embrace, protecting a well-regulated, competitive mortgage market must be a top priority.

Homeownership is a primary weapon against America’s gaping wealth inequality. This puts independent mortgage banks, or IMBs, front and center, because these non-bank lenders consistently step in to offer loans during troubled times when the big banks often pull back. After the Great Recession, for example, mortgage origination from traditional banks fell sharply. Especially hard hit were Federal Housing Administration and Veterans Administration loans — the ones first-time homebuyers, moderate-income families and minorities rely upon.

IMBs, on the other hand, did just the opposite. Our mortgage activity steadily increased, and we began offering a large majority of FHA and VA loans. Today, IMBs continue to originate more than twice the loan volume as large banks, and we remain the “go-to” lenders that 2 in 3 minority homebuyers and 60 percent of middle- and working-class borrowers turn to for a mortgage.

That means safeguarding these IMBs as neighborhood-based mortgage specialists will help preserve home loan access for creditworthy, moderate-income borrowers through the COVID-19 pandemic and beyond. At a time when record-low interest rates are beckoning, we can help provide mortgages to enable more families to buy in.

The only thing that could undermine our ability to again contribute to economic rebound and sustain home loan volumes at a precarious juncture would be the activities of a handful of misinformed policymakers.

Unfortunately, threats to IMBs abound. Some uninformed lawmakers, officials from the Federal Housing Finance Agency and other groups representing competing special interests have recently pushed policies that would make it much more difficult for us to help borrowers lower their monthly payments and withstand coronavirus-related financial hardship. There are other, more fundamental changes under consideration, too. Among them, plans to add onerous requirements and even kneecap Fannie Mae and Freddie Mac are of grave concern.

Independent mortgage bankers have come to recognize, however, that the threats to the industry derive in large part from misunderstandings about who we are and what we do. For instance, few Americans realize that the vast majority of the more than 900 IMBs operating in communities across the United States are small, privately held companies where investors have skin in the game to push them toward responsible lending. These are not the risk-taking, “too big to fail” behemoths of last decade’s housing collapse.

IMBs are highly regulated, and more so than ever. Since 2008, all loan originators — IMBs, banks, credit unions, and other lenders alike — have been covered by the Secure and Fair Enforcement Mortgage Licensing Act and the National Mortgage Licensing System, and we are now overseen by the Consumer Financial Protection Bureau. IMBs are also regulated by each and every state banking or mortgage lending supervisor where they operate, making the FHA, VA, and other federally backed loans and selling mortgages to Fannie Mae and Freddie Mac subject us to even more rigorous standards and oversight ensuring lending transparency, quality, fairness, and stability.

This is the type of information policymakers and the public need to know.

Policymakers in Washington entrusted with crafting housing guidelines should keep in mind that American voters are pushing for the country to put our money where our mouth is — behind our nation’s founding tenet of equality for all. Not only must direct government funding target programs that expand opportunity, the rules of the road affecting how Americans invest in themselves — and in their homes — must also bring us closer to our ideals. Any change that fails in this regard must be rejected without question.

The truth is, IMBs are not just part of the housing market — they’re the best at providing access to homeownership for those who otherwise might be refused the dream of living in a home they own. Congress and our housing policymakers should protect this critical segment of the industry — not punish it, thereby hurting those who need our help the most.

 

Bill Cosgrove is the president and CEO of Union Home Mortgage.

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