BOSTON -- Mortgage Bankers Association Chairman--Elect David Kittle went back in time for his opening remarks to attendees at the MBA National Secondary Conference and Expo here last week. All the way back to 1934.
"Two kinds of forces assist in recovery: natural and artificial," he said. "There are those who believe that natural forces primarily govern and that recovery is more in spite of, than because of, artificial forces.If people insist on demanding a remedy for the evils we are suffering today, the only sure response is: Time." Those lines were from the opening address delivered by Chairman W. Walter Williams at MBA's Annual Convention in 1934.
Kittle then compared the "artificial forces" set in place then, like the formation of the FDIC and the Farm Credit Administration and compared present times and current efforts to rein in a spiraling housing market. "Just like today, lots of measures were being debated and passed," he said. "What Mr. Williams couldn't have known in October of 1934 was that much of the recovery was already underway....So why am I talking about 75 years ago when there's so much going on right now?To point out that it is very hard indeed to see exactly where you are when in the middle of such turmoil."
Kittle said that response to bad times has improved much since then. "Compare today to the S&L crisis of the '90s, when upwards of 750 banks failed. While we're not out of the woods, it's safe to say that we won't be seeing anything near that," he said."A crisis caused by so many factors needs many actions to quell it, both natural and artificial. Let's look at the steps we've already taken, those under consideration now, and some new ideas with great promise." He named the stimulus package passed by Congress, the temporary increase in conforming loan limits for Fannie Mae, Freddie Mac and the FHA as a welcome boost for the secondary market. And he cited the lowered capital surplus requirement that is estimated to free up about $2 trillion dollars for jumbo loans, subprime refinancing and loan modifications.
More help came from the Federal Reserve's unprecedented step of creating a temporary overnight lending facility for investment banks and the Federal Home Loan Banks granting of extraordinary temporary powers in April. The FHLB can now use Affordable Housing Program set-asides to help low income borrowers refinance or restructure subprime loans, said Kittle.
He finished with a call to modernize the FHA and create a stronger GSE regulator (for Fannie and Freddie) and legislation that would allow state housing agencies to issue tax-exempt mortgage revenue bonds for use in refinancing the mortgages of borrowers in trouble.
Looking to his own house, Kittle called for the licensing of all loan originators (both brokers and actual lenders) and for the creation of a national database that can boost consumer confidence by holding all originators accountable.But he said the MBA would remain opposed to bankruptcy cramdowns, stressing, "MBA remains watchful and will continue to clearly and simply demonstrate the obvious ill effects that such a change to bankruptcy laws would have on the entire market.Nothing would subvert the work of the best natural force--time--more than allowing cramdowns today."