David H. Stevens President and Chief Executive Officer Mortgage Bankers Association What’s the New Normal?

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3 The Regulatory Ecosystem Author of Policy/Rule/Regulation Stakeholder of Policy/Rule/Regulation DISCLAIMER: The policies/rules/regulations shown, as well the corresponding authors/stakeholders, are illustrative and thus may not be an exhaustive list. …for what has become a very complicated web of relationships and interdependencies. Confidential: Not for Distribution Origination Servicing Securitization/ Secondary Markets CFPB FHFA/GSEs HUD/FHA HUD/FHEO DOJ Federal Reserve FDIC, OCC, SEC ATR/QM LO Comp Appraisals HMDA RESPA/TILA Escrow HPML SAFE Servicing Standards Loan Limits G Fees Buybacks LLPAs Disparate Impact/ Fair Lending Basel Risk Retention/ QRM MIP Policy Indemnification QC Policy False Claims Minimum Servicing Fees Volcker Rule Reg AB Margin Rule

4 A Systemic Market Shift

5 Estimated Originations 1990 to 2015 Source: MBA – July 2014 Mortgage Finance Forecast

6 Refinance Applications – Recent Activity Source: MBA Weekly Applications Survey

7 Expensive to Run Total Net Production (bps) Source: MBA’s Quarterly Mortgage Bankers Performance Report

8 A Changing Set of Demographics Looking Ahead: + Millennials will form 24 million new households + Households in their 30s – increase by 2.7 million + Majority Minority Joint Center for Housing Studies of Harvard University

9 Minorities Will Account for Three-Quarters of Household Growth Over the Coming Decade

10 Household Growth - Younger Minorities and Aging Baby Boomers

11 Projected Changes in the Population, by Age Source: Census Bureau

12 Source: American Housing Survey Share of Households Living in Central Cities, by Age of Householder, 2001, 2005 & 2011

13 Source: Census Number of Women and Men with Bachelor’s and Higher Degrees, by Age, 2013 Thousands

14 Making the Dream a Reality?

15 Owner- and Renter-occupied Households & Homeownership Rate Source: Mortgage Bankers Association and Census Bureau Thousands of households Homeownership rate (%)

16 Household Wealth Increasing Source: Federal Reserve

17 Credit Score Trends Source: CoreLogic

18 Credit Availability - One Quarter of Pre-Bubble Rate

19 Lower FICO Borrowers In GSE Purchase Market – Declined & Not Returned Source: U.S. Mortgage Insurers

20 Pricing Beyond Reasonable Returns? Furthermore, MI coverage lowers loss risk to an effective 67 LTV (1) The proposed December gfees would have increased the cost of credit across the board. (1) MI coverage protects against loss, but higher LTV loans would be expected to have a higher incidence of default

21 Clear in Home Sales Data, Too

22 WHAT DOES THE FUTURE LOOK LIKE? 22

23 Source: National Association of Realtors Share of First Time Homebuyers As percent of existing home sales

24 Source: FRBNY / Equifax Challenge: The Delay

25 Echo Boom Will Fuel Future Demand

26 Industry Keeping Options Open!

27 5 Strategic Areas for Success