Mortgage Bankers Association of America
Remarks prepared for delivery by
88th Annual Conference
Secretary Mel Martinez
Tuesday, October 16, 2001
morning. I appreciate your very warm welcome.
thank you for the kind words, and congratulations on surviving
your first day as chairman. Thank you for your work on behalf
of the mortgage industry and the homebuyers it serves.
want to recognize your outgoing president, Andy Woodward. Andy,
I appreciate the leadership you have brought to the Mortgage Bankers
Association of America, especially as its president over the past
year. Thank you for welcoming me when I first came to the Department
of Housing and Urban Development and for breaking me in as the
am honored by the invitation to participate in MBA's 88th Annual
fact that this is your first annual meeting outside the United
States says something important about the changing nature of the
mortgage banking industry, and American commerce as a whole.
hardly matters anymore whether a business partner is on the other
side of the street or the other side of the world. Today, international
borders can be crossed with a single click of a mouse. E-mail
and Internet conferencing are the Pony Express of the 21st century,
delivering information and bringing people together more quickly
than ever before.
economy is a global economy in every sense, with new frontiers
creating new opportunities. In many ways, the planet seems smaller.
Events that matter in one country now matter in every country,
because we are trading partners, we cross borders to visit family,
we are enriched by each other's cultures and traditions.
this helps to explain why the attacks of September 11th were condemned
from virtually every corner of this planet, and why the civilized
world is now united behind the U.S. response.
want to pay special tribute to our host nation. As a good neighbor
and a great friend of the United States, Canada has stood shoulder
to shoulder with us in every way. My government appreciates the
unqualified support of this nation and the generosity of its people.
than eighty nations, including Canada, lost countrymen amidst
the destruction in New York, Pennsylvania, and the Pentagon. This
was more than an attack on the United States. As President Bush
said in his address to Congress, "Perhaps the NATO Charter reflects
best the attitude of the world: An attack on one is an attack
every speech, President Bush has reassured the American people
that he is resolved to winning the war against terrorism. And
I am convinced that through his leadership, this President will
wanted to come here this morning to tell you personally how much
I appreciate the quick response of the lending community to these
was proud to speak for the industry when we stood beside families
affected by the attacks - those who may have lost a breadwinner
and had not yet had time to figure out how they were going to
pay the mortgage. Mortgage bankers came to the forefront, and
even though many of you were not required by law, you agreed to
hold off on any foreclosures for 90 days. You showed compassion
to these families during a very difficult time.
when HUD advised lenders to reduce mortgage interest rates for
military personnel on active duty, MBA immediately joined us to
help spread the word to your customers. Military men and women
are now free to focus on combating terrorism without fearing for
their financial security back home.
you for reaching out a helping hand.
actions are particularly commendable considering the personal
loss of the men and women of the mortgage finance industry. Twenty-three
MBA member companies had offices within the World Trade Center.
Many other MBA firms are located nearby. My heart goes out to
those of you who lost colleagues and loved ones.
spite of our heartbreak, the President has urged the nation to
get back to business. And somehow, we are.
was no doubt tempted to cancel this conference in the days immediately
following the attacks. But by coming together like this, a new
agenda has taken root in your meetings and private conversations.
Now MBA members want to know the implications of the attacks on
your industry, how you can help your customers, how to spearhead
disaster relief programs in your communities.
I think the greatest service you can offer is to continue doing
what MBA does best: helping families achieve the American Dream
72.3 million American families own their own home, the most at
any time in this nation's history. I give a lot of the credit
to MBA and its members. You provide the financing that makes homeownership
possible for millions.
of our top priorities at HUD is to expand the number of homeowners.
This goal has the full support of President Bush. We all recognize
that owning a home builds financial prosperity and emotional security.
Just as importantly, homeownership creates stronger communities
by turning tenants into stakeholders who get involved in their
schools, work together to fight crime on their block, and become
Little League coaches and soccer referees.
are achieving homeownership in record numbers, but at rates far
below those of non-minorities. So we at HUD are focused on minority
homeownership through initiatives like the American Dream Downpayment
Fund and a new program that allows families to put their public
housing vouchers toward a downpayment on a home.
Bush has made it clear that this Administration will do everything
in its power to give homebuyers all the information they need
to make the right decisions for their families, and that we have
high expectations of the lending industry. Earlier this year,
in proclaiming National Consumer Protection Week, the President
wrote, "While it is crucial that as many consumers as possible
have access to credit, their access must not be hindered by unlawful
know that MBA works actively to bring cases of mortgage fraud
and abuse to the attention of its members through conferences,
mailings, and its web site. I applaud you, but I also say to you
that this is not enough. The industry can - and must -
do more to protect the homebuying public, and through better disclosure,
empower consumers to shop for the financing that is right for
Although the purchase of their home is the single largest investment
a family will probably ever make, most people are unprepared for
the homebuying process. This is not by choice - the process
itself is cumbersome and routinely fails to protect homebuyers.
closing, too many families sit down at the settlement table and
discover unexpected fees that can add hundreds, if not thousands,
of dollars to the cost of their loan. They are not told who is
getting their money, or what services they are receiving in return.
And because this is thrust upon the buyer at the last moment,
they have no opportunity to determine whether these extra costs
are at all reasonable.
the spot, the purchaser is forced to make an impossible choice:
either hand over the extra cash and sign, or lose the house.
spend approximately $50 billion each year at closing, and I would
suggest that most of them have no idea where their money went.
This is unacceptable.
first took on the problem in 1974 by enacting RESPA. RESPA curbed
many troubling practices, but the process of buying a home has
changed a great deal since then, and the law has not kept pace
with industry practices.
itself has issued a number of clarifications since 1976, and adopted
new RESPA regulations in 1992 and 1994 and a new policy statement
two years ago. The questions regarding disclosure of fees were
never resolved, though, and repeated efforts to reach a consensus
have been unsuccessful.
long-term goal is to make the homebuying experience less complicated,
the paperwork requirements less demanding, and the mortgage process
itself less expensive. As a first task, we will restore clarity
to the process by finally reforming RESPA regulations. I invite
your partnership in working together with HUD to create a user-friendly
process that is, first and foremost, good for the consumer.
my confirmation hearing, I said that RESPA reform was an area
I felt a responsibility to address. I know that this is a difficult
topic. In fact, the folks who counseled me to leave this issue
alone call it the "third rail" of the finance industry: in other
words, you touch it at your own risk.
too many lenders and brokers have taken advantage of poorly informed
homebuyers, and reforming RESPA now is the right thing to do.
Consumers need it. The industry ought to embrace it. Because if
we do it right, everybody benefits. Homebuyers will get the information
they need in order to become intelligent, well-informed consumers.
The lending industry will have fewer regulatory hoops to jump
I announced that HUD is opening a "rulemaking process" to begin
the RESPA reforms that the industry and consumers need. It is
time to begin removing the mystery from the maze of forms, fees,
and procedures that families grapple with when they close on a
a central part of our efforts, we will require unprecedented disclosure
from you, so that long before a family arrives for their closing,
they know how much cash they will need; who is being paid, and
for what services; and whether those costs are reasonable.
this information should be available at the time a prospective
homebuyer submits an application, so that they can use it to help
them shop for the best loan, at the lowest cost, for their family.
I believe consumers should not have to wait for these protections
while the rulemaking process is underway, I have written to FHA
mortgage lenders strongly encouraging them to begin immediately
disclosing all fees at the time of application. I am urging the
rest of the mortgage lending industry to follow suit.
look forward to MBA's support.
everyone agrees that the more financing options consumers have,
the better. One of those options, the yield spread premium, can
be a valuable tool for opening the doors of homeownership.
Unfortunately, yield spread premiums can - and have -
been abused. We have all heard of cases where a broker persuades
a homebuyer to accept a higher interest rate without a corresponding
cut in upfront costs. Or a homebuyer is put into a higher interest
rate than they qualify for, for the sole purpose of enriching
the broker. The broker then pockets the yield spread premium,
and the homebuyer is worse off.
has always said that yield spread premiums are not illegal as
long as the broker actually performs services for the buyer and
the costs are reasonable. So in the second action HUD took yesterday,
I sought to provide stability to the mortgage banking industry
by clarifying HUD's long-standing rule and preserving yield spread
premiums as a financing option.
yield spread premium is an important homeownership tool that ought
to be available for consumers to use in financing their homes.
The cost of closing today is burdensome, especially for lower-income
and minority families who have trouble saving enough cash to satisfy
the downpayment and other closing costs. Yield spread premiums
allow cash-strapped buyers to pay some or all of the settlement
costs over the life of a mortgage. By retaining this financing
option, we will give more Americans the opportunity to close on
a new home.
viability and the stability of the mortgage banking industry must
be preserved, otherwise the flight from this segment of the industry
will make it more and more difficult for families to finance their
accomplish these things, I issued a policy statement reaffirming
the legality of yield spread premium - with the caveat that
they ought to be fully disclosed at the beginning of the homebuying
process. We also restated HUD's policy regarding the practice
of up-charging, which the department has opposed for 20 years.
part of RESPA reform, we are committed to simplifying the paperwork
for homebuyers. Both the mortgage industry and consumer advocates
have offered suggestions for improving disclosure forms and procedures.
have heard your frustrations that HUD in the past has not done
enough to enforce RESPA, basically rendering the law toothless.
As a final step, we are making RESPA enforcement a priority and
giving it more resources. This includes staff dedicated to studying
complaints, a new $1.25 million contract for investigative services
relating to RESPA compliance, and enhanced coordination of RESPA
enforcement between HUD and the major federal banking regulators,
to identify violators as a part of routine bank examinations.
this stronger focus, we will not only respond to complaints, but
move proactively against violators.
the end, however, the first line of defense for a consumer should
not have to be the court system. We need more homebuyers sitting
at the settlement table, not sitting inside a courtroom. The comprehensive
effort we are undertaking this week represents appropriate, achievable
worked closely with consumers and lenders in crafting this solution,
and I appreciate the input we received from MBA. I think the steps
we have developed as a result offer an appropriate solution: both
consumers and lenders benefit from increased disclosure and access
to a range of home financing options.
know that some of you are already going the extra mile by providing
more disclosure to your customers, and I salute you for it. You
are the model for the reforms we will require throughout the rest
of the industry.
frankly, there are practices within the lending community that
in the long term, do not serve the public and do not serve the
industry. Many homebuyers view the closing process as being filled
with frustrations that reflect poorly on the entire industry.
I do not condone these practices, and I know that you do not condone
the public comes to you for help in financing the home of their
dreams, they deserve to do so in a consumer-friendly climate.
They need to have the facts that will help them shop for the right
mortgage. They need to know exactly how much they will pay at
closing, and to whom, and what they will receive in return. The
broker should be clear about whether they are working for the
consumer or the lender or themselves.
this critical information is not provided, the homebuyer should
have the freedom to take their business elsewhere. This is the
incentive that has been missing up until now, thanks to the lack
of timely disclosure. And this is the incentive I intend to inject
into the process.
a past member of a bank board, I know how much good the banking
community can do. Every day, families turn to you for help in
making one of the most important decisions of their lives, and
in return, you help them achieve their dreams and become homeowners.
The journey from house-hunter to homebuyer cannot happen without
am committed to working with you to create a homebuying process
grounded in transparency and simplicity. We will ask more of you
in the process and challenge you to your better nature. In doing
so, I am convinced that we will inspire greater public confidence
in the mortgage lending industry and make the American dream of
homeownership a reality for more families.
Content Archived: March 11, 2010