Housing Supply Accelerator: An Interview with Mortgage Bankers Association President and CEO Robert Broeksmit

[00:00:00.000] - Emily Pasi

Hello, and welcome to another episode of the APA podcast.

 

[00:00:09.940] - Emily Pasi

I'm your host, Emily Pasi, Director of Public Affairs at the American Planning Association. Joining me today is Bob Broeksmit, President and CEO of the Mortgage Bankers Association. Bob and MBA are core partners, along with APA and the National League of Cities, for the Housing Supply Accelerator. The Housing Supply Accelerator is a national campaign to improve local capacity, identify critical solutions, and speed reforms that enable communities and developers to work together to produce, preserve, and provide diverse, attainable, and equitable housing by realigning the efforts of public and private stakeholders in the housing sector to meet housing needs at the local level. All right. Good morning, Bob. Bob Broeksmit is joining APA's podcast today. Thank you so much for joining us, Bob. So happy to have you here with us to discuss our partnership on the Housing Supply Accelerator.

 

[00:01:09.130] - Robert Broeksmit

Thanks for having me. I'm really glad to be here.

 

[00:01:12.310] - Emily Pasi

Bob, let's get into it. Why is it important for community planners, bankers, home builders, elected officials, and realtors to come together now to embrace a shared vision and agenda around local progress on housing supply?

 

[00:01:25.970] - Robert Broeksmit

Well, I think the laundry list of participants that you mentioned is really important because I think there's a growing understanding that housing affordability and housing availability is a national problem, but one that cannot be solved at the federal level. So we all need to join hands and work on the local, county, and state levels, where a lot of the regulatory issues and the zoning issues and the permitting issues that add so much cost to housing can be solved, but only if every part of the sector comes together and sings with one voice to increase the housing supply and make housing more affordable, which we are happy to see is now a national political issue in a way that housing hasn't been in a very long time.

 

[00:02:18.010] - Emily Pasi

I know. When is the last time you have seen two national parties talk about housing supply and zoning reform in the same breath at their respective conventions? It's quite a moment we're having here.

 

[00:02:29.320] - Robert Broeksmit

Exactly.

 

[00:02:29.830] - Emily Pasi

How are financial institutions impacted by the nationwide housing crisis? We hear about it so oftentimes from the planning perspective here at APA, but really curious to know, how's it impacting financial institutions?

 

[00:02:44.960] - Robert Broeksmit

Well, in several ways. One, of course, is that fewer loans are being made, and the consumers and the would-be home buyers who are affected by this really have a ripple effect across the economy. And what we've seen at the Mortgage Bankers Association is that the feared outcome of people no longer wanting the American dream hasn't come about at all. People are discouraged, and they have to wait longer and save more money and do things a little later in life, just as they've done a lot of things later in life, including marrying and having children. They're buying houses later in life, but they still want to buy. For lending institutions, it's how do help spread the word and avoid some misconceptions. For instance, I can't tell you how many times I've looked at surveys that say a significant minority, if not even a majority, and some of them, think that you need 20% down to buy a house. Well, nothing could be further from the truth. If you're a veteran or you can take advantage of the US Department of Agriculture program, you need zero down. If you are a first-time home buyer or eligible for the FHA program, you need three and a half % down.

 

[00:04:00.720] - Robert Broeksmit

And Fannie Mae and Freddie Mac both have programs where you need three % down. So part of it is just being better about letting people know what it takes to get into a house and also coordinating the myriad down payment assistance programs that already exist so that would be home buyers know that the barrier is lower and there is help out there.

 

[00:04:26.090] - Emily Pasi

And let's shift and talk a little bit about what the Mortgage Banker Association, APA, our partners at NLC, the National League of Cities, and the realtors and the home builders are doing to actually help to address the challenges that we've already described today in this conversation. Why is it important for MBA to be a part of the Housing Supply Accelerator?

 

[00:04:50.070] - Robert Broeksmit

Yes, MBA joined the Housing Supply Accelerator because we understand that the housing crisis is not just a social issue, it's very much an economic issue, and it directly impacts the real estate finance industry. And we think it's important to bring the voice of the lending community to the table because after all, there are all kinds of policies that make good sense. But if you don't work with the lenders to implement them, then you get nowhere. And I'll give you just one quick example. Jay Powell and the Fed stepped in during the pandemic in a very dramatic way and lowered rates very significantly. That act in itself helped not one single homeowner. The lenders who made that money available, either for refinances or to make purchases more affordable, are the ones who actually were there where the rubber meets the road. And the same thing is true today, where we need to work on accelerating housing supply. And you can have all the best ideas in the world, but if the lenders aren't working with you hand in hand, then the results don't get to the consumers that we care about.

 

[00:05:57.820] - Emily Pasi

Yeah, that's incredibly important. I've been on the road this month talking to APA chapters across the country and hearing about the challenges that our individual members are facing on the front lines as we think about increasing housing Housing Supply and Finance is one of those key barriers that continues to come up. In fact, that was identified by the national partners as a part of our housing supply accelerator work. In fact, the Housing Supply Accelerator Playbook, which launched earlier this year and MBA, is a key supporter of, addresses 17 strategies to overcome financing gaps contributing to the national housing shortage. Talk to me a little bit about the strategies spotlighted in the playbook and which ones you're most excited about?

 

[00:06:50.110] - Emily Pasi

Sure. Well, I'm really particularly excited about solutions that focus on public-private partnerships, which have proven so effective in so many ways, flexible financing tools, and innovative approaches to middle income housing. We talk so much about low and moderate income housing, and frankly, the people who have a lot of money don't need our help so much. But the middle income housing is an area that's often forgotten or not effectively taken care of. So for instance, leveraging the low income housing tax credits with private capital to fund multifamily developments to create more affordable rental units or creating financial financial products that bridge the gap between traditional affordable housing programs and market rate financing. And there's also some very exciting things going on in terms of modernizing underwriting standards to account for today's realities. And I'll mention a couple of those. There's a push toward cash flow underwriting, which instead of the typical show me your pay stuff and your W2, I mean, that works for people like me who get the same paycheck twice a month. But for so much of our economy, where people may participate in the gig economy or have second and third jobs, it's very difficult to document in the traditional way.

 

[00:08:10.010] - Robert Broeksmit

So that if instead of doing that, you look at 12 months bank statements and you say, Okay, well, here's what actually comes in and goes out every month. It's a really effective way to qualify people, even though it's not the traditional way of doing it. And I'll add one other thing. I have been in this business for 39 years, and I am convinced that there is no greater predictor of your success in a mortgage than what your success was in the previous housing payment. That could be a previous mortgage, or for first-time home buyers, of course, it's your rental payment. We're very excited that more and more tenants are getting credit for their on-time rental payments through working with the credit reporting agencies to have more landlords report that, or working with Fannie Mae and Freddie Mac, and I hope others soon, who will... Actually, FHA, too, I should mention, that will consider your positive rental history, and it can be as simple as giving the lender access to your bank records, which then shows, well, gee, there's 1,200 So if you have a truck's going out on the first of every month, and it happens like clockwork.

 

[00:09:19.290] - Robert Broeksmit

Well, so you're going to now have a $1,500 mortgage payment, and I'm just making up the numbers to illustrate. But if you, all of the things equal, are making a housing payment and you can step up a little bit into a mortgage payment, that is such a great predictor of ultimate success because none of us want to put somebody in a house that he or she can't afford. But the history of making those payments in a timely way shows that the borrower has the willingness and ability to make the new mortgage payment.

 

[00:09:54.080] - Emily Pasi

Talk to me a little bit, Bob, about the lending community and how you can specifically help demystify housing finance for community planners. I'm really interested in understanding a little bit more about educational initiatives or resources. That would be really helpful to our audience as they're trying to learn more about this financing piece.

 

[00:10:15.660] - Robert Broeksmit

Yeah. One of the things about mortgage lenders is that we tend to have our own acronyms and dictionary of terms, and we don't even hear ourselves using them. And by the time we finish the sentence, there'll be three acronyms that normal people would have no idea what we're talking about. So I think that we have a lot of good consumer-facing loan officers and others in the process who can speak in English about these things, because frankly, there's nothing more complicated in mortgage land than arithmetic. It's a lot of fractions and adding and subtracting, multiplying and dividing. It's really not much more complicated than that. But when we give it these esoteric terms, people glaze over and say, jeez, I don't understand what you're talking about. So just having the participants partner with lenders who can put things in English. And we can do this in the form of joint webinars with planners, creating user friendly guides that explain financing structures. And again, the financing structure for the typical mortgage has has gotten actually much simpler. I know in the world where things seem to get more complicated, after the great financial crisis, frankly, the mortgage products simplified to a 30 year fixed rate mortgage.

 

[00:11:43.020] - Robert Broeksmit

I mean, that is probably, I don't know, probably 95% of what we originate. Yes, there's some adjustable products, but they're a very small minority. So the financing is actually not that complicated. And the other thing, it does get a little more complex on some of the multifamily So navigating federal programs like the low-income housing tax credit, you do need a partner that is skilled at that because it does get a little bit complicated in terms of how that tax credit can be layered with other financing options to make things pencil out in terms of multifamily. But we have members who are very conversant in that, and we're delighted to partner with everybody in the process to make it easier.

 

[00:12:27.920] - Emily Pasi

I know we had a chance to hear from some of those members at a convening that MBA and APA were a part of as a part of last year's Housing Supply Accelerator kick-off conversations. I think I can say on behalf of our APA members, the folks who were involved in those conversations came a way of having a better sense of what was happening in the finance space and how they can better access those tools and resources after engaging with your members. So looking forward to more of that cross-pollination here as we continue to grow this partnership together. Through the housing supply accelerator.

 

[00:13:01.920] - Robert Broeksmit

And one piece of advice I have along those lines, and it's probably a piece of advice that I would have more broadly about things in life, don't be afraid to raise your hand and say, I don't understand what you just said. And and say, Could you please explain that again? Because I can guarantee you that if you have that feeling, so do others in the room. And people were self-conscious about acknowledging that what was just said went right over our heads. It's also a good reminder for the presenter. Again, we can get into our vernacular and use a bunch of shorthand and acronyms. If people just say, Oh, I'm sorry, would you mind spelling out again what DTI is? Someone can explain the debt to income ratio. And again, don't be afraid. You're going to help the presenter be better at it. And you're going to have so many people come up to you after the meeting and say, I'm so glad you asked because I had no idea what on earth he was talking about.

 

[00:13:59.750] - Emily Pasi

So you hear that all of our planning listeners, don't be afraid to follow up with lending institutions, with the bankers to ask those questions. What does that mean? It's going to help us to solve issues easier and just make sure everybody's on the same page.

 

[00:14:16.550] - Robert Broeksmit

Exactly.

 

[00:14:18.350] - Emily Pasi

Bob, the Housing Supply Accelerator playbook spotlights case studies from all over the country, but from communities really committed to increasing their housing production, specifically. Where are How do you see communities really innovate their approach to the funding resource and the missing financing tools? And what can we learn from these places?

 

[00:14:37.800] - Robert Broeksmit

Well, one of the things that we at the Mortgage Bankers Association are most proud about is our Convergence Initiative, which we launched in Memphis in 2020, and then in Columbus, and then in Philadelphia. And a particular example from Columbus is where the local government, private lenders, and community stakeholders work together to create innovative housing financing solutions that address the city's housing needs. I mentioned Memphis, Columbus, Philadelphia. They all have different housing needs. They all have a shortage, but much different specifics. So we work. We don't helicopter in as MBA and say, here's the solution and have a nice day and do a press release and go home. We get people on the ground to work together. And Columbus has implemented several strategies, including partnerships with local banks to offer flexible financing options for first-time home as well as middle income rental developments. And I will also highlight that we worked with the city council in Columbus to have funds allocated for down payment assistance. And then we're very excited about a very large seven-figure investment from the Federal Home Loan Bank of Cincinnati that will also help scores of Columbus residents with down payment assistance and really leverage the federal Home Loan Bank model, which has a very active affordable housing program that they were delighted to partner with Convergence on because we brought all the local stakeholders together.

 

[00:16:10.320] - Robert Broeksmit

So that's a thing that has worked really well. And then in addition in Columbus to our outreach to financial services providers, we also did a direct consumer thing, leveraging the area code there, 614. So it's called Bloom 614. So that we can make information directly available to consumers so that they can learn more about the process and have resources that help them along the way. And then when they're ready to work with a mortgage lender, they are that much farther along the journey.

 

[00:16:49.460] - Emily Pasi

That's pretty incredible. The power of public and private partnerships really coming to light there in the examples in Cincinnati and Columbus, and many more to come, I'm sure, as well.

 

[00:17:00.980] - Robert Broeksmit

Right.

 

[00:17:01.950] - Emily Pasi

Bob, if you had to boil it down, what are the activities that local government should prioritize to close housing development finance gaps? And how can financial institutions support these efforts?

 

[00:17:16.300] - Robert Broeksmit

Yes, this is perhaps the most important thing we can talk about because local governments prioritizing the streamlining of approval processes for development. Even if the answer is no, a no after six weeks versus a no after a year and a half is a really important signal because typically a no would come with a no, but, and if you did this, that, or the other, then we could work together. So it's really important to get to a decision. And then offering incentives for affordable and middle income housing, which, as we know, is the most difficult to pencil out for developers, and creating flexible zoning regulations that allow for more diverse housing options. And financial institutions can to support these efforts by providing the capital for developments that meet community housing needs and offering financial products that support innovative housing models. And of course, working with local governments to structure these public-private partnerships that reduce development costs. And if we do all that together, and it's easy for me sitting in Washington to say this, and I understand there are local complexities all over the country, but there is, I think for the first time, a real national  consensus that we just don't have enough housing, and the only way to get out of that problem is to build more.

 

[00:18:38.380] - Robert Broeksmit

And then we just have to have people in the localities around the country to get behind that and say, Instead of saying, I don't want new development in my neighborhood, say, This is a community problem that is really hurting everyone here, and here are sensible ways to bring in new developments so that the communities can grow in a smart way.

 

[00:19:02.280] - Emily Pasi

Yeah, and I'm happy to report that from my travels across the country this year, I'm seeing it firsthand that planners are really helping to lead those conversations and trying to identify those solutions and working toward creative ways to reform zoning and increase housing supply options in their respective communities, whatever that might look like for them. It's great to hear that these activities are recognized by the financial institutions and that you all can be a partner with planners on this very difficult but incredibly important change-making process.

 

[00:19:43.710] - Robert Broeksmit

Great.

 

[00:19:44.740] - Emily Pasi

One of the things that we like to talk about at the Housing Supply Accelerator partnership is that it really does take an all-hands approach to tackle the supply shortage. What does that look like from a financial standpoint?

 

[00:20:01.360] - Robert Broeksmit

Yes, I'll go back to my image of stacking different things on top of one another because it's really what it takes to get this done. So what do I mean by that? Combining traditional mortgage financing with government subsidies where they're available, tax incentives, private equity, of course, you need some private skin in the game, and impact investing. That's something that there's all sorts of money chasing sensible investments in the impact space and housing that's affordable to people who are currently priced out of the market hits that squarely. And that way we can create a pipeline of funds that can be tapped for affordable workforce and middle income housing. And one example I'll give you for how you have to leverage all of those different sources is the conversion of office buildings to apartments. I'm sitting here at the corner of 20th and M in Washington, DC, and one can walk about two blocks and see the former Peace Corps building is now an apartment complex. And yes, it doesn't work if you're in the middle of the block, and yes, it doesn't work if the floor plates are too huge and you have no windows and all those sorts of things.

 

[00:21:24.240] - Robert Broeksmit

But there are plenty of buildings where this does work, but it only works with the involvement of all the entities that I mentioned. You have to have a city or a suburb, wherever it is, that recognizes that the B&C office space that is currently vacant or mostly vacant is unlikely to go back to being a vibrant office. And you have to have a property owner who acknowledges that that building is not worth what it was when it was a fully leased office, and on and on it goes. But you do have successful examples of how this can work and revitalize a downtown or a suburban area. And also, very importantly, provide some tax revenue, because one of the things that people don't think about that often when they're vacant office buildings, is that the property taxes on those buildings will plummet because the value of the building is plummeted. So to put it back to productive use, the city or the municipality really depends on that. And so it's difficult, but it's a process that we do see working here in Washington and in different places around the country.

 

[00:22:39.660] - Emily Pasi

I think the federal support that we're seeing in form of executive actions and other federal agency steps that are happening on this residential conversion is really encouraging and exciting to see here, to your point. Let's talk about specific actions, Bob, that financial institutions can take to support the creation of these public-private partnerships that you've identified as so key in overcoming the regulatory barriers that all too often stop the production of housing.

 

[00:23:12.120] - Robert Broeksmit

Sure. Well, a few examples of actions that financial institutions can take include providing seed capital or bridge loans to get projects off the ground, creating dedicated funds for housing development in underserved areas, and as we mentioned, working with local governments to reduce financing costs through tax-exept bonds or other incentives. Again, the incentives are aligned. The municipalities need vibrant communities. They need the tax revenue, and the developers can only make it work with cooperation from the municipalities. So that's how we see things working. I know there have been times in the past when perhaps the municipalities and the developers were working at cross purposes. But I think there's a very broad recognition that we have to join hands and do this together or it's not going to get done. And the problem is just too acute and it's too widespread for that sort of interaction to occur. So I think cooperation among all the entities, which we're seeing increasingly, there are definitely good signs of this as this has become a national issue that's talked about every day. Sometimes you'd say, well, gee, if it's talked about every day, but the Congress doesn't pass a bill, then you didn't get anything done.

 

[00:24:37.790] - Robert Broeksmit

Well, that's not right. I think that there's so much that gets done when this is on the top of the agenda, even if it's not a big, broad, visible bill passed by the Congress.

 

[00:24:47.740] - Emily Pasi

Yeah, absolutely. And I think we're starting to certainly see that alignment through examples like the Housing Supply Accelerator and the work that's coming out of it. Speaking of alignment, how should we be collaborating integrating to better align lending, underwriting, appraisal standards with the housing and land use objectives in local plans?

 

[00:25:09.300] - Robert Broeksmit

Well, I think that one of the key parts to doing that is involving lenders early in the planning process to make sure that the financial realities are integrated into local policies. And so modernizing appraisal and underwriting standards to account for innovative housing solutions like accessory dwelling units and mixed income developments is also critical. And these public-private partnerships can streamline these efforts by combining capital and expertise from the financial institutions with the regulatory flexibility and incentives from the local governments that drive this diverse and attainable housing solution that we're all talking about. So I suppose that's starting to sound like a broken record, the collaboration and cooperation, but it just doesn't happen without it. And again, I think that we're seeing more and more examples of this around the country, so it is an encouraging development for sure.

 

[00:26:03.720] - Emily Pasi

And what can cities and communities do to be better partners to bankers and financial institutions who are actively working to make housing supply more diverse, equitable, and attainable?

 

[00:26:16.460] - Robert Broeksmit

Well, I run a trade association, so I can't resist saying that creating predictable regulatory environments would help a lot. This is a continual source of frustration for our members is that the Regulatory environment is many think punitive, and as opposed to just working together to get to a sensible result for consumers, is that it just puts up tremendous burdens and barriers. So predictable regulatory environments helps a lot. And then, of course, financial incentives, as we've discussed, like when I was mentioning the office building to apartment conversions, very few pencil out without some involvement from the local government. So I do think that that's an important piece. And the other thing is that participation from the local government attracts private capital because there's, again, an alignment of incentives and the joining of a genuine policy-related impetus to create more affordable and attainable housing, as well as investing that seeks a good return, but nothing crazy, but also values the end result of helping cities. So I think that's really important. And I also think that involving bankers in the early stage of housing plans so that financing challenges can be addressed upfront. A lot of times, the things that stall projects are things that if they'd been identified sooner, things could have been just structured a little differently to avoid the problem, and then trying to it after the fact just adds a whole lot of time and money.

 

[00:28:02.960] - Robert Broeksmit

So getting with your financing partners early on who can help structure things and know sources of investment and also how to work with the municipalities on getting the appropriate approvals, that just saves you a lot of time and makes for a better end product.

 

[00:28:24.590] - Emily Pasi

We're through worth repeating. Alignment through the planning process is where it begins and a way that we can work to create shared solutions and outcomes in the end that help to lead to that better housing supply that we're all looking for in communities nationwide. Bob, Bob Broeksmit, President and CEO of the Mortgage Bankers Association. Thank you so much for your time and insights today. Apa is so thrilled to be a partner with you through the NLC APA Housing Supply Accelerator, and we can't wait to see what comes next for this partnership.

 

[00:29:02.830] - Robert Broeksmit

Well, I echo those remarks. We're delighted to be partnered in this, and I thank you for having me on.

 

[00:29:08.150] - Emily Pasi

My pleasure. Take care, Bob.

 

[00:29:09.930] - Robert Broeksmit

Thank you.

 

[00:29:10.940] - Emily Pasi

Thanks for listening to another episode of the APA Podcast. Visit APA's website to learn more about the Housing Supply Accelerator. To hear previous episodes, visit us at planning.org/podcast. You can also subscribe to the APA podcast on Apple Podcasts, Spotify, Overcast, or wherever you get your podcasts.