Industry veteran compares and contrasts America with other countries
We’re more alike than we are different.
Across the world, homeownership is as desirable a goal as it is in America. Nations also share struggles, including the double whammy of low inventory and higher rates, just like in America.
David Stevens (pictured), CEO of Mountain Lake Consulting Inc., ticked off some major differences between other countries and the US during a recent gathering of international mortgage professionals organized by the National Association of Mortgage Brokers. The International Mortgage Brokers Federation gathered professionals from not only the US but Australia, Canada, Ireland and the United Kingdon. “If you in the Australian market, the United Kingdom, Sweden and other markets, in many cases those markets have mortgage schemes,” Stevens said, chuckling at a term considered pejorative in the US. “A mortgage scheme is simply a new type of program to try to get folks into homes,” he explained to the Americans in the audience.
He then pointed to a big advantage the American system has. “The one thing that Western Europe doesn’t have that we do have is we now have Dodd-Frank legislation and the qualified mortgage rule.”
US industries underwent sweeping overhaul
Formally known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the sweeping legislation was enacted July 2010 to overhaul financial regulation in the wake of the Great Recession. Changes mandated by the legislation affected all federal financial regulatory agencies and virtually the entire financial services industry in the US. President Barack Obama called for the overhaul, on a scale not seen since reforms enacted after the Great Depression in the early part of the 20th century.
Stevens referenced the qualified mortgage rule, which dictates that a lender must consider and verify a borrower’s current monthly income or assets – other than the value of the property that will secure the loan – and monthly debt.
Stevens acknowledged that the regulatory climate in much of Europe is such that it allows for greater flexibility for the banking industry to offer more creative products.
“They tend to lean into shorter ARMs and balloon mortgages,” he noted. “In Australia, it’s very common to get a loan that adjusts with their federal funds rate and adjusts the longer you get the loan, maybe after one year. With all those things, they can tie the mortgage rates to more short-term interest bumps.”
But there are disadvantages: “There’s been a lot of concern of late these short-term balloons are now going to be refinanced in a much higher interest rate market,” he said, “and people are feeling pain and shock.”
He volunteered an interesting reason why he’s become more aware of mortgage machinations across Europe: “I’m only aware of this because I’m an expert witness in two big class action lawsuits against the real estate industry in this country, and I’ve been studying the Western European markets. We all have different advantages.”
But then he invoked American advantages not seen elsewhere: “We have Fannie Mae and Freddie Mac, the FHA, the VA and USDA,” he said, referring to the Federal Housing Administration, the UW Veteran Affairs Department and the United States Department of Agriculture, respectively. The latter agency provides a path to homeownership for low- and very-low-income families living in rural areas,
“We have a government that’s directly involved in supporting long-term, 30-year fixed-rate mortgages,”
Stevens has more than 40 years of experience
Starting out as a loan officer in Denver during the 1980s, Stevens has been in the industry for more than 40 years. Prior to his role as the president and CEO of the Mortgage Bankers Association, Stevens served as the US assistant secretary of housing and federal housing commissioner at the US Department of Housing and Urban Development. Past stints in the private sector include being president/COO of the Long & Foster Real Companies, Inc.; executive vice president of wholesale lending at Wells Fargo Home Mortgage; senior vice president in charge of single-family lending at Freddie Mac; and group senior vice president at World Savings Bank.
Want to make your inbox flourish with mortgage-focused news content? Get exclusive interviews, breaking news, industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
