GSEs a Major Focus at Busy MBA Annual 2015

I was glad to see so many of our members at our 2015 Annual Convention in San Diego this week. Nowhere else do more than 4,500 leaders in the real estate finance industry come together to learn from one another and survey the regulatory and lending landscape.

Among the many topics and discussions this week, the future of the GSEs was one of the bigger themes. Everyone from Michael Stegman of the White House to FHFA Director Mel Watt, offered opinions and policy considerations about the secondary mortgage market.

Stegman’s remarks were most notable for reinforcing the White House’s clear position that the GSEs must not be recapitalized and released from conservatorship without comprehensive reform of the GSEs’ charters.  The White House clearly believes, as MBA does, that structural reform is a critical piece to ensure that lenders of all sizes and business models have equal access to the secondary mortgage market.

Along the same lines, one of the main points I emphasized during my speech at the conference, and which I reiterated in a meeting with Director Watt, was the need for FHFA to reconsider the GSEs’ current risk sharing model. Specifically, they need to embrace upfront risk sharing so that all lenders, big and small, can be active participants in the program. Currently, unfortunately, upfront risk share transactions are only being offered to a handful of institutions, leaving thousands of medium and small lenders out in the cold.

That is why MBA has consistently promoted upfront risk share that works for all lenders no matter their size. It’s also why we’ve proposed mortgage insurance and recourse as part of the risk share structure. After all, upfront risk share would bring more competition to the market, could lower costs to consumers, and would allow all lenders to participate on an equal, level playing field.

The White House seems to be in the same place, as Stegman remarked, “front end credit risk transfer pilots could determine whether the cost of lender recourse, reinsurance, or deeper MI coverage plus reduced G-fee is less or more than the standard applicable G-fee charged by the enterprises today.”

Let’s face facts. The GSEs will remain in conservatorship until Congress passes and the President signs into law housing reform legislation. And, FHFA has the authority to change the GSEs’ operating procedures without legislative action. So, in order to benefit taxpayers, homebuyers and lenders of all shapes and sizes, FHFA should act now and implement a comprehensive and sustainable risk sharing model. Otherwise, the housing economy will never reach its full potential.

For more about this topic and others, check out my speech from the conference.

2 thoughts on “GSEs a Major Focus at Busy MBA Annual 2015

  1. Dave,

    Upfront risk sharing, like Depp MI, may be good for your larger members but it is not good social policy as it only increases risks to the public in economic downturns. Even Senator Corker recognized this and made it the basis to decided that first loss risk transfer could be waived in times of economic uncertainty and that the FMIC could waive these requirements when approving new companies to operate in the market. Moreover, it unfairly advantages larger firms relative to smaller lenders and community banks.

    I would very much like to discuss these issues with you, in private or – for the benefit of public policy – in public. Hopefully you will not avoid such a discussion on such important public policy issues.


  2. We completely agree that current risk share activity is mainly to the benefit of just a few institutions and have called out aggressively for change here. That is why I am demanding to expand risk share to benefit all lenders, not just a few, and to make the process more transparent. If you read my speech ( you will see that I specifically call for up front risk sharing, be it deeper MI, recourse or other credit enhancements, that allow all lenders, big and small, to participate.

    As for deeper MI, look at the recent report from Milliman ( that finds deeper MI can reduce the GSEs’ (and thus the taxpayers’) risk by 50% and save borrowers more than $2,000 over the life of their loan.

    I appreciate and agree with your perspective and concern for smaller institutions. The vast majority of MBA members are just that; community banks, credit unions, and independent mortgage bankers. Rest assured their welfare is our top priority as we look at how to rebuild the secondary mortgage market. I believe this needs to be an area where we all align on the objective as we work to make sure policymakers, especially the FHFA, do the right thing for all lenders who finance housing in this country.

    Happy to discuss further, Josh. Give my office a call and we can set it up. I think we have a much greater chance of reaching points of alignment in person rather than in 140 characters and in comment sections of blogs.

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