Five Questions with Janet Reilley Hewitt, editor in chief, Mortgage Banking magazine
Janet Reilley Hewitt is editor in chief of Mortgage Banking magazine, which is an official publication of the Mortgage Bankers Association and an important source of news, opinions, and analysis for the lending industry. With 32 years on staff at the magazine, Hewitt recently announced plans to retire. She graciously agreed to speak with The Score, and to share some of her decades of insight, amid preparations for her final issues of the publication.
It has been said that “Those who don’t know history are destined to repeat it.” In your 32 years of following and analyzing the industry, what are some historical moments that you think changed the mortgage industry forever?
There are really three things that happened during my tenure that I think changed the industry forever. The first was when national home prices actually turned negative, and there was depreciation on a national average basis for the first time since the Depression. The next thing that changed the industry forever was when Fannie and Freddie were taken into conservatorship. The third thing was when the Congress had to allocate money from the U.S. Treasury to the Federal Housing Administration (FHA) program for its insurance fund.
That first development—national home prices turning negative—I think made mortgage lenders subconsciously turn away from the basic premise that a mortgage was a form of secured loan that was backed by a real asset (a home). That development—that the asset that secured the loan could lose a substantial part of its value—eventually made lenders rely too much on stricter credit underwriting of the borrower, rather than taking into account that the loan was secured by a real recoverable asset. It didn’t help that in many states regulations and the courts made foreclosing on the asset securing the mortgage next to impossible. With that subsequent over-reliance on the credit side of the borrower, and under-reliance on the asset securing the loan, credit conditions became unnecessarily strict and inaccessible for too many Americans. That remains the case today, even though valuation data and analytics are more sophisticated and predictive than ever before.
Fannie/Freddie in conservatorship was just a profound shock to the entire housing finance system. I think it sent a message to some that the federal government should not give too much latitude to those who run the government’s primary sources of housing credit (the GSEs). This has led to micromanagement of the GSEs, and their credit standards and loan programs. The event itself, I think, also convinced some policymakers that homeownership wasn’t the low-risk investment that many had previously believed it to be. And it also led lawmakers to conclude that they needed to write things like QM and ability-to-repay rules into law rather than letting the housing finance experts write the rules.
The need for the FHA capital infusion by the Treasury just fed more mistrust of the government’s housing finance programs in Washington. That, in turn, has led to more micromanagement by nonexperts in Washington who tend to get political when they set housing policy.
Many have credited Mortgage Banking with foreseeing and assessing the credit market meltdown early. What predictions can you make for the market in the decade to come?
One prediction for the market to come is to remind everyone that residential real estate is a supply-and-demand industry. With an unpredictable and large demographic bulge coming (millennials) who may eventually be potential buyers in large numbers, and with a large and aging demographic bulge (baby boomers) likely to be big sellers at some point, those supply and demand issues will come into play. If boomers decide to sell and the millennials (and Gen X buyers) aren’t ready to buy in roughly equal numbers, then prices may take a hit. Also, with institutional investors owning large volumes of single-family rental properties, who is to say that they won’t decide to dump large amounts of inventory all at once, which could also negatively influence prices?
Then there is the whole notion of crowdsourcing capital to buy homes. Just completely out-of-the-box sources for capital to buy houses may lie in the not-too-distant future.
Mortgage Banking magazine will be ending its print run in October, and with that, so ends its need for cover art. What was your favorite cover for the magazine, and why?
Two favorite covers: The one with Ben Bernanke’s photo on the cover because it told the world that we were such a rock star magazine that we could get an exclusive interview with the former Fed chairman (who himself is a rock star). The second-favorite cover was for the October 2005 issue. It shows an up close photo of the moon with a house sitting on it, surrounded by a little garden. The headline was “Uncharted Territory.” This cover appeared well before 2007, when the mortgage market blew up because lending standards had gotten out of control. So that cover proves we saw it coming as early as October 2005.
Of the many people you have interviewed for the magazine, who do you think has made the biggest impact on how you view the industry?
Lots of people I have interviewed have had a big impact on me. I would have to say everyone I interviewed from this industry has helped to teach me what I know. It takes a village, to borrow a phrase. This is a complicated and great industry, but there about as many angles to it as you could ever imagine. I now understand that.
What plans do you have for your retirement?
What will I do in retirement? Absolutely nothing. That’s what pensions are for. I might also play a little golf and travel. Just got back from Ireland, so I think I have the travel bug.