Is it finally time to restore some balance to the mortgage market so more first-time homebuyers have access to credit? The leadership at the Mortgage Bankers Association thinks it is. And Bill Cosgrove intends to make the return of the first-time homebuyer his primary focus as the MBA's incoming chairman.
"It is imperative that we increase" the percentage of first-time homebuyers in the market. "If you don't have first-time buyers, you don't have move-up buyers," the former real estate agent said. And "you don't have a healthy real estate market."
First-timers used to make up 40% of the market, but that has declined to 29% over the past decade, according to MBA economists.
The incoming chairman noted that the MBA will not be alone in seeking to increase access to credit and make Federal Housing Administration loans more affordable. "FHA is the key to homeownership and we want to partner with the Obama administration and HUD to make sure FHA is serving first-time homeowners."
Julian Castro, the new Department of Housing and Urban Development secretary, has commented that credit is too tight and too many potential homebuyers are being shut out of the market.
"MBA is very encouraged by the HUD secretary's early remarks. It seems that he gets it. And we are excited about that," Cosgrove said. He noted that other regulators and consumer groups are also concerned about access to credit. That is "one issue that brings us altogether."
Cosgrove is the chief executive of Union Home Mortgage Corp. He began working at the Strongsville, Ohio, mortgage banking firm in 1994, was named the president after three years and bought the mortgage banking company in 1999.
Today, the privately-held company has a branch network in seven Midwestern states and a few offices in North Carolina, Florida and California. He estimates total originations will come in at $1.5 billion for the year.
About 80% of the business comes from the retail originations and 20% from the newer wholesale channel. Both channels are growing, he said, but he expects to see rapid growth in the wholesale broker channel in 2015.
"We are always excited about the retail business but we are also very excited about the future of the wholesale business," he said.
The CEO noted that the wholesale business has virtually the same controls as the retail side these days when it comes to appraisals, documentation, verification of income and the quality of the loans. "A decade ago you couldn't make that statement."
Cosgrove attributes Union National's success partially to his involvement with the MBA. "I have been heavily involved in MBA at all levels for last 10 years," he said. That includes a term as president of the Ohio Mortgage Bankers Association, which he really enjoyed. "I learned a lot and worked with a lot of great people."
One of the MBA's goals this year is to fix FHA so that its premium structure is more affordable for homebuyers. The agency currently charges a one-time 175 basis point upfront fee and a 135 basis point annual fee.
"We believe the annual fee is too high," Cosgrove said in the interview, and it makes FHA low-down-payment loans more expensive than Fannie Mae and Freddie Mac loans.
Other trade groups are also pressuring the FHA to lower its annual fee.
"The single most effective thing HUD could do to improve homeownership affordability is to implement an immediate reduction in the level of FHA annual premiums," the Community Home Lenders Association said in a recent letter to Secretary Castro.
Reducing the annual premium will "attract more and better quality borrowers," Cosgrove said in the interview, and help the FHA mortgage insurance fund recapitalize faster.
There are rumors that Fannie Mae and Freddie Mac are expected to roll out some low-down-payment products at the MBA annual convention in Las Vegas.
"We have been calling for the lower-down-payment products to come back," Cosgrove said. "It is a step in the right direction, but it doesn't cancel out the need for FHA to provide more financing for first-time buyers."
The MBA also wants to work with regulators and consumer groups on regulatory relief. The tight credit conditions are a "by-product of the regulatory pendulum swinging to two far in the wrong direction," he said. "All the stakeholders understand the real estate market is going sideways today and there are reasons for it. We want to increase the dialogue to responsibly bring regulation back to the center."
The Ohio mortgage banker grew up in Bedford, a suburb of Cleveland.
Today, he lives about 25 minutes from the house where he was born and where his parents still live.
He got a real estate license at 22 and later entered the mortgage banking business.
"Cleveland has had its struggles but it is in a little renaissance period so it's exciting," he said. "I like everything Cleveland," he stressed and that includes being a "die hard" Browns, Indians and Cavaliers sports fan.
"It's painful" at times but a lot of fun, he said. Basketball star LeBron James is returning to the Cavaliers this year. "I'm taking my kid to that first game."
His father introduced him to golf and "I have been playing it my whole life," he said when asked about his hobbies.
Cosgrove tries to play a round of golf every week or two with his buddies.
"To me to play with the guys I grew up with in and around the neighborhood is a great day."
