(Editor’s note: This select print feature originally appeared in the September issue of MReport magazine)
Benjamin Franklin once said, “When you’re finished changing, you’re finished.” That statement applies to just about everything in the mortgage industry. Even though change is inevitably necessary for growth, many mortgage professionals would like the regulatory changes to stabilize so we can get back to doing what we do best—helping Americans achieve their dream of homeownership.
I’ve had a chance to speak with many distinguished women leaders, during which I gained their perspective on recent industry change—and more importantly, what they would like to see in the future.
Growing Female Industry Leaders
The industry is making progress and women leaders play an important role in driving change. Patty Arvielo, President and Co-Founder of New American Funding, believes the mortgage industry is clearly undergoing a transition, from the people we employ as we look to serve a new generation to the way we process loans to meet the needs of new buyers. “As we know, Hispanics are the largest sector of first-time homebuyers, and it’s predicted by 2020 they will account for 55 percent of new homeowners in the nation,” Arvielo said. “Women are an integral part of homeownership, especially in this community. According to a Better Homes and Gardens’ Real Estate and NAHREP survey, 61 percent of Hispanic women believe they will play a larger role than their partner in their next home purchase, specifically when it comes to researching potential homes, communities, or neighborhoods. The role of women is also stronger when researching mortgage options and deciding which home to purchase. Hispanics are reshaping the homebuying process in America, and women are leading the way.”
The top traits observed in successful women in housing are strongly believing in doing the right thing while being empathetic yet assertive, open to change, and able to recognize strengths in ourselves, as well as others. We also know how to trust our instincts— if it feels right, it usually is right! If it feels wrong, be cautious and do your due diligence before jumping in with everyone else.
While we continue to see the numbers grow, we must increase the number of women involved in all mortgage banking educational opportunities, advocacy, and senior-level executive positions. The mortgage and housing industry is a great place for women. No matter what role a person plays in the mortgage transaction, you know that the ultimate end result is a new homeowner.
“I love this industry and helping people achieve their dream of homeownership, establishing themselves in a community, the fun things they do to spruce up their homes … it’s all very thrilling to me. I also love sharing my knowledge of our products to our Lenders and Realtors and showing how we can help our homebuyers,” said Pamela Shinsel with the Utah Housing Corporation, a 31-year industry veteran.
I believe women really do love this industry as we like to share wonderful experiences and see happiness in our work. Homeownership is the ultimate dream of Americans and we get to be part of that dream for so many individuals and families every single day.
Legislative and regulatory compliance has become a huge focal point for the industry.
Starting with the mortgage market meltdown in 2008, the necessary tightening of credit, eliminating exotic programs such Pay Option ARMs, No-Income No Assets, and other low/no doc loans, the impact of RESPA, GFE changes in 2010, and now TRID in 2015, “The industry has exponentially increased origination and fulfillment costs,” said Jill Burns, Executive Vice President of Operations at Mountain West Financial, Inc. Many of the regulatory changes have undesirably impacted the homebuying process.
Many mortgage lenders are spending most of their time and expenses on their processes rather than focusing on improving the homebuying process and developing programs to successfully attract more homeowners. With new regulation, it’s important to understand how compliance expenses can increase exponentially. Susan Milazzo, Executive Director of the California Mortgage Bankers Association, believes that in some instances this has led to independent mortgage banks selling to larger companies.
“Now that the market is healthier, mortgage bankers have pivoted to strengthening their companies with high quality staff and technology that will make them more efficient and competitive, as well as compliant,” Milazzo said.
When it comes to legislative and regulatory advocacy, the industry needs to remember that it is still popular among many policymakers to target the mortgage industry. While there arguably hasn’t been a “safer” time to purchase or refinance a home, Milazzo goes on to say, “Political motivations will continue to negatively affect the mortgage industry for some time to come. Under the guise of consumer protection, laws will be proposed and passed that create undue burden on lenders and increase risk for investors, all of which equate to a negative effect on access to affordable credit.”
It is critically important for everyone in the industry to become educated on what is being considered at the state and federal level and get involved in their industry’s advocacy efforts. We need to understand the regulatory changes and prepare our companies for the next state of legislation. There is looming legislation on the horizon which will continue to be a burden on mortgage bankers in meeting compliance demands which, at the end of the day, could hurt the home-buying process rather than help it as it is intended to do.
The Consumer Financial Protection Bureau (CFPB) was created to make sure lenders treat consumers fairly and sometimes that has an adverse effect when compliance issues slow down and complicate the process, especially for first-time homebuyers. When it comes to down payment assistance programs offered by Housing Finance Agencies (HFAs), the CFPB needs clearer guidance so lenders are not left interpreting the rules in different ways. “I would like to see CFPB come out with some guidance regarding down payment assistance loans to make it easier for the lenders,” said Lisa DeBrock, Director of Homeownership of Washington State Housing Finance Commission. “We are hoping they will just let the lenders use a Loan Estimate and Closing Disclosure regardless of the terms. Right now, there is a great confusion as some lenders will force the loan to be exempt. We currently see lenders disclosing in many ways and since there is no clear guidance, there is no uniformity from lender to lender.”
DeBrock is right. Many HFA loans are exempt from TRID guidelines while other loan structures require the GFE disclosure form if the closing cost fees are within a certain threshold. With cumbersome and confusing rules, it makes it more difficult and less likely for mortgage bankers to offer these wonderful programs which promote homeownership to low- to moderate-income families.
With all that said, we need to remember that the mission of the regulatory rules is to HELP the homebuying process, and we have come a long way over the past several decades. Kim Johnson, Program Development Specialist with Colorado Housing and Finance Authority, reflects on changes she has seen: “In the early ‘80s, I went to a Federal Reserve Seminar about wealth disparity between whites and minorities. I was struck by the way that homeownership has the power to help families build wealth. Before fair housing laws were established following World War II, Caucasian families bought homes in the suburbs while many minorities were redlined into particular neighborhoods. Because of redlining, those homes didn’t appreciate like homes in the suburbs did and when those minority homeowners died and left their heirs their estates, those estates weren’t as large as those left by white homeowners. I was excited in the mid ’90s when the lending industry moved to automated underwriting decisions which allowed the purchasing process to be more fair and consistent for all buyers.”
Pamela Shinsel remembers when interest rates were 11 percent in the late ‘80s and qualifying for a mortgage was not as entailed as it is today. Shinsel believes there have been so many good and positive changes over the years, but on the other hand, she said, “I also feel that because of these changes it’s tougher at times for a homebuyer to qualify for a mortgage and the qualification process takes so much longer.”
Tia Boatman Patterson, Executive Director of the California Housing Finance Agency, has a uniquely intimate appreciation for the role government can play in housing. “My mother bought her first home with help from an assistance program,” Patterson said. “I’ve seen first-hand how homeownership can make a huge difference by increasing standards of living and making progress towards eradicating poverty. The challenge for us now is that there is such a limited inventory of homes for the folks who want to make the jump from renting to owning.”
“There are just so many hurdles for the first-time homebuyer right now, in addition to the limited inventory,” continues Patterson. “It’s harder to save for a down payment. Graduates are coming out of school with crushing student debt. Increased fees and costs make it economically harder for developers to build entry-level homes.”
Increased Importance of Technology
In order to have a competitive advantage, Burns said, “Lenders need to utilize reliable, cutting-edge technology that exceeds the expectations of our clients. To be competitive, we need to be easy to work with, and provide a great customer experience. Our industry now requires specialists that are proficient users of more technology platforms and components than ever before.” For lenders to create a cutting-edge environment to drive our business, we need to continually analyze and focus on removing the obstacles that create duplication and inefficiencies of all types. This requires continued and expanded focus on the right technology. It also requires us to focus on removing the impediments to great customer service. Creation of Innovative Programs Lenders are finally discovering the unique products offered by housing finance agencies that allow them to bridge the gap to homeownership for low- to-moderate-income homebuyers. Production nationwide has picked up as more and more HFAs enter the TBA market.
“Here in Washington, our agency is helping more and more homebuyers every year thanks to the popularity and ease of our Home Advantage program—and thanks to our multiple down payment assistance programs,” DeBrock said. “Last year alone, we helped almost 4,000 households buy a home—an increase of 57 percent over 2014—with 3,443 of them using down payment assistance.”
WSHFC has also seen growth within their conventional products as Fannie Mae offers the HFA Preferred product. The HFA sets the guidelines for income which DU recognizes. In Washington, the income limit is $97,000 statewide—a huge benefit for borrowers who are trying to access conventional financing, as this limit would be lower in many parts of the state using open-market financing. DeBrock would like to see this program continue to grow, because often it will offer the borrower a lower payment— not to mention long-term affordability, as the mortgage insurance is cancellable.
“As we begin the looming shift from a refinance to a purchase market, I expect there will be pressure on real estate professionals, lenders, the secondary market, and our elected officials to put affordable housing near the top of their agenda,” said Dottie Sheppick, a well-known affordable housing consultant. “It has been a long time and we must desperately turn our attention to creating products and programs that will responsibly transition more renters to homebuyers and allow others to move up. These are the fundamentals that will induce new construction, create jobs, and strengthen our economy.”
Patterson does, however, see some hope. “Governor (Jerry) Brown has recognized the importance of housing as an economic driver and has introduced some changes that could ease some of those difficulties by making it easier for us to partner with cities, counties, and other organizations. Our multifamily division has introduced new programs to get back into that business. We’ve made some changes to our down payment assistance programs that can give access to more first-time buyers. This is paying off; we’ve increased our single-family business more than a hundredfold, going from just 50 loans two years ago to 5,000 this year.”
We all would like to see the industry place more emphasis on making housing counseling widely available to consumers. Johnson advocates that we should be teaching children about finances and the importance of financial planning so they can learn good habits early on that will help them become successful not only in homeownership, but overall in life.
Having worked in the mortgage industry for more than 35 years, Shari Flynn, Executive Director, Lubbock Housing Finance Corporation, believes that credit continues to be the primary barrier to homeownership. “Making sure potential buyers get solid financial counseling (as opposed to a quick credit ‘fix’) will help them become not just buyers, but successful homeowners,” Flynn said. “While the benefits to their families are obvious, successful homeownership is also beneficial for communities and for the mortgage industry at large.”
We all would really like to see the process of qualification become more comfortable for our borrowers so that they truly understand the whole process better.