Can Policy Fix Housing Affordability? A Look at FHA, CFPB, and Supply Challenges

Can Policy Fix Housing Affordability? A Look at FHA, CFPB, and Supply Challenges

[David] Alice, let’s get over to you with the legislative update. Good to have you join us, especially with you being busy with family things right now for you to take a moment aside to join us. It’s much appreciated. Alice, give us your report on the legislative update.

[Alice] Absolutely. So few things. You’ll notice the MBA Newslink also talked about the fact that they would like now that President Trump has said, put all new regulations aside as one of his executive orders, put the regulations aside. Included MBA has responded to asking The CFPB to set aside the regulation that technically has already gone into effect. And this is when we did talk on previous shows. And this was the responsibility that now exists under a final rule for non banks to report essentially any time they’ve been put under a final public order. So if and one of their regulators has. said you are under an order. You have to pay these fines and penalties for these consumer Financial Protection Act violations that your entity may have occurred and what the CFPB has done is set up a registry so that a non bank lender today would essentially have to, if they had one of these final orders, they would have to report it. There’s a form. There’s a contact person that has to be set up. And then that entity has to keep reporting in as they have met compliance with those orders. Very often those orders have follow up audits or other specific actions that the bank has to achieve in terms of policy or procedure changes very often. And so the bank would have to continue updating that report in the CFPB registry. So that’s Already in effect the large entities had to start doing that January 14th. , the midsize group, another group has to start by April 14th. And then there’s a group labeled other that has to start doing this in July., would need to formally come out and put something in writing to actually give permission to not do these reporting. For those of you out there who would be subject to CFPB this public registry of the orders that you are under, it’s still a wait and see, you still should move forward, set up your procedures and plans to move forward until we hear more. We’ll keep you posted. The other thing is we are watching the appointees. As you heard Adam say, he wasn’t sure about Scott, the Senate for the treasury secretary. And I do see that on Friday there was a Senate confirmation. I believe that’s what I’m seeing here. So just a quick follow up for MBA there and then the watch the MFP reduction, Dave, you wanted to talk about that, there’s plenty of money there in the FHA mutual mortgage insurance fund.

[David] Yeah. What are your thoughts about lowering that for low to moderate income to reduce costs to get a home, reduce the barrier? it sounds good, but I don’t know that the practicality of it, it’s going to bring it about Alice. If it’s going to really move the needle.

[Alice] If they say they’re only going to lower it for a particular income type, that makes it impossible to try and manage it. That puts the onus on the lender to get the MIP factor, right? So it really would be a lower for everybody. Yeah. Or maybe it would be by a loan amount, particular if you’re in this loan amount, maybe it’s a lower MIP by loan amount. I don’t see them going by an income calculation because that makes it very dicey by loan file. So I think that to me, FHA has traditionally done it across the board, unless maybe you took home buyer counseling, that might be something for certain first time home buyers is another bucket that sometimes they’ve separated in the past. But in general, yeah, there’s plenty of money. It’s all about the math and how they do the projections. And so today their projections show that they are fine to have a reduction. Now, when you compare that in the higher LTVs to PMI costs, everything then depends on the combined payment. So the value, to your point of how much value will it have that is always done in combination with what is the MIP in combination with what are rates today. It’s never by itself. So it’ll have an impact as long as FHA rates are consistent with conventional.

[David] Bill, your thoughts on this?

[Bill] I go all over the place. I’m generally skeptical of a lot of things that are to promote affordability because I think All it does with the supply problems is just keep driving prices higher and higher, right? It brings more people into the game.

[David] More people into the game. Yeah. Then. Yep.

[Bill] And so we don’t, but I think if you’re playing the long game where one of the changes that was put into place in the past with the FHA premiums being life of loan, I think that’s an area where there’s some easy, longer term relief that’s Probably fair to everybody involved, but doesn’t really change the upfront calculus that much, which is really, let’s face it, what’s driving it is everybody’s trying to find ways to crack the affordability knot, which is still going to be solved by building.

[David] Yeah, point on thing, if we solve the affordability or we reduce it, make it more affordable, all we bring is more buyers into a market that still is stuck with just so much availability and it’s the supply side of properties that are going to be there. I’m flying out to Florida on Wednesday to be at Brix, BRIX modular, check it out listeners. And I’m really looking forward to seeing what this looks like. But it’s a manufacturing of not modular in the sense of the old traditional modular sense. They built a really factory home that is really well built meets Florida hurricane standards, and we go from there. So I get excited about what could be as a result of these new supply solutions that is manufacturing more homes. Their target is to be getting to the point where they’re manufacturing a million homes. That is pretty exciting. And where it’s possible. They’re talking about having manufacturing starting in Florida, then Texas, and then Arizona somewhere, and manufacturing massive amount of homes at a much more affordable, this has already been Proven a proven concept that works is let’s find ways to reduce the cost through this and then we add something like President Trump’s mandate the executive order reduce the cost on the regulatory side and then you see the interview with the mayor of LA and Trump and There’s a, what’s the perception of I am doing something about redoing costs. I am using executive orders and you look at it and go, it’s not moving the needle. You got to do more. So it’s going to be an iterative discussion going back and forth, but we’ve got to get more homes built. And as well as looking at what can we do to unclog the pipeline of what’s out there. So a lot of supply issue is the one that’s the nagging persistent one. In addition to affordability, all your point is really well made bill.

[Bill] Yeah and Dave, and I’m seeing maybe it’s been out there and I’m just noticing it more, but I’m seeing more investment type articles on different home building options and one is what they were calling micro factories where they’re building, right? Because one of the big things with your larger scale modular home is there’s a limit as to how far you can go before the trucking cost starts to take away the competitive advantage. And what this company is doing is building what they call micro factories, which is really. Think of an inflatable sports bubble and they have a factory right there and they can get the factory set up and running in a couple of months. And so if they’re doing a subdivision, it works, then they can disassemble everything and move on to their next location. Yeah. That’s it. It’s going to be things like that start to make the difference versus. I agree.

[David] Yeah. And I think there’s opportunities for lenders listening to this. They should be looking at staying in touch with what these, some of these initiatives are. I’m really excited to be affiliated with the BRIX modular at this point to just say what are the various mutations that will come from this? But we’ve got to reduce costs and we can get without cutting corners on the quality of the construction. That’s the part when you start to sit back. Backstepping or minimizing or reducing the amount of regulatory side of it in, not to say that the regulatory dollar for dollar effort goes into reduce or increasing costs or improving the quality. I think a lot of it’s just noise and we need to get that out. Alice, good report. so much. Appreciate it.



Alice Alvey - Union Home Mortgage

Alice Alvey, Master CMB

She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.

Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.

She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.

Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!