The Community Mortgage Lenders of America’s Statement on FSOC’s 2019 Annual Report

Ed Wallace Advocacy

Washington, DC. – (December 9, 2019) – The CMLA always welcomes thoughtful, data-based regulatory constructs that recognize the relative strengths and challenges of each mortgage delivery channel.

Our Main Street lenders weathered the Great Recession precisely because they underwrote every mortgage like it was their own family’s.  And in truth, the owners’ money is on the line for every underwriting decision because mortgage putbacks (from aggregators and the GSEs) to our lenders come directly from the owner’s pockets, not some executive indemnity fund that effectively shields TBTF executives from responsibility.

Today our IMBs receive constant oversight and supervision from the GSEs, Ginnie Mae, the FHA, VA, 50 state regulators, and of course the CFPB.  We have examiners in our offices on a continual basis, and oftentimes more than one set of examiners at the same time.

Our IMB members receive funding, guidance, and oversight from our warehouse lenders, which in turn are supervised today by the nation’s prudential banking regulators.

Some specific aspects of our IMBs’ business models which did not appear to have been considered are the following:

  • Most originator independent mortgage banks or Main Street lenders do not carry debt on their balance sheet above and beyond warehouse lines which are short-term funding vehicles. These funding vehicles are directly collateralized by the underlying asset that originated the debt, so it’s nearly impossible for Main Street lenders to be a menace to the financial system.
  • Most non-depository servicers carry servicing portfolios that rival “non-To Big To Fail” community banks and the companies are run by savvy individuals that have the experience and capability to manage their companies in down markets.
  • Most Main Street originators are not servicers and thus pose little to no threat to the economy as compared to TBTF banks who must take great risks in order to achieve Wall Street analyst expectations and their forward-facing guidance. Private Main Street lenders are not subject to these pressures that have caused the TBTF banks to write massive penalty checks for their behavior.
  • Finally, Main Street has gladly stepped in to combat the discriminatory lending practices that TBTF banks have pursued by not lending below 640 or 660 FICOs which are traditionally held by minorities and some first-time home buyers.

Also, the vast majority of our lending is under the QM rule, something the FSOC ought to have mentioned in its report. The QM rule has eliminated, as it should have, the Century Mortgage model of ash & trash mortgage originations that harmed US families and the economy.  

Finally, the CMLA will again remind readers that TBTF-Bank funded DC Think Tanks, including the Brookings Institute and the Urban Institute, have a history of making unfounded statements and reports on the IMB industry; we understand that these organizations have vigorously shopped these flawed reports to the regulators, and we urge the regulators to exercise great caution when reading these lobby documents.  

The CMLA members serve all neighborhoods and a diverse array of American families.  We know how to serve them well because we have been doing so in times both good and bad, and we are committed in the future to the same.

The CMLA is a Washington, DC based advocacy group focused solely on the concerns and needs of midsize and small community-based lenders.

Ed WallaceThe Community Mortgage Lenders of America’s Statement on FSOC’s 2019 Annual Report