In a new episode of the HousingWire Daily podcast, host Sarah Wheeler chats with Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA). The pair discuss the latest happenings for independent mortgage banks (IMBs) during the election season, updates to the Federal Housing Administration (FHA)’s 203(k) loan program — which allows homebuyers to loop repair costs into their mortgages — Basel III regulatory proposal concerns and more.
Broeksmit starts the conversation by sharing his opinions on Republican and Democratic interest in the housing market after attending both parties’ conventions this year. He says that merely having housing affordability at the forefront of the national agenda is a major step in the right direction for the industry at large. But Broeksmit also expresses skepticism of Democratic presidential nominee Kamala Harris’ down payment assistance proposal, which he deems to be unnecessary due to the existence of FHA loan programs with 3.5% down payment minimums.
He says that the industry’s problem is more about supply than demand, and he favors Harris’ policies to stimulate new construction across the U.S. Wheeler chimes in and says that the pain of low housing supply has reached the White House after years of miscommunication.
Next, the duo discusses the FHA 203(k) changes and the effects on overall housing supply. The problem with the 203(k) program, according to Broeksmit, was the previously low financing amount of $35,000, which isn’t enough to truly help homebuyers. Recently, the amount was increased to $75,000, and buyers can also finance consultant fees. The program boosts overall inventory by incentivizing buyers to revamp dilapidated properties and add them to the fold.
“We’re really enthusiastic about this as a way to get tired housing back into good shape in an affordable way through an FHA program to get owner occupants to do this work,” Broeksmit says.
Next, Wheeler asks Broeksmit to share his opinion on the recent re-proposal of Basel III and why it’s beneficial to the overall mortgage industry. Basel III is a set of proposed regulations designed to improve regulation, supervision and risk management in the banking sector. It aims to help banks survive economic turmoil and ultimately offer more funding to qualified borrowers.
Basel’s full re-proposal compensates for what Broeksmit calls unnecessary changes, or “gold-plating,” of the capital requirements to levels 20% higher than what is already required. The initial proposal would have disincentivized banks to offer loans to low-income, minority and first-time homebuyers. But without the unnecessary gold-plating, all homebuyers have a better chance of receiving funding from a bank, he said.
Wheeler and Broeksmit go on to explore how the larger housing market affects IMBs. Broeksmit explains that high interest rates impact these lenders by making it harder to originate mortgages. Federal Reserve rate cuts will make life easier for IMBs looking to offer more funding this year, and he anticipates more rate cuts beyond the 50 basis-point reduction announced this week.
To close the conversation, Wheeler inquires about the impact of artificial intelligence on the IMB community and whether the industry plans to embrace the new technology-focused landscape. Broeksmit says that the leading IMBs are already using AI to identify purchase and refinance candidates. He believes that using AI for these purposes is vital for portfolio retention and servicing quality.