In a new episode of the “Real Estate Insiders Unfiltered” podcast, hosts James Dwiggins and Keith Robinson sit down with Pete Mills — senior vice president of residential policy and industry engagement at the Mortgage Bankers Association (MBA) — to discuss the housing affordability crisis in today’s complex real estate market.
The group also discusses factors such as fluctuating interest rates; changes to the U.S. Department of Veterans Affairs (VA) loan program resulting from the National Association of Realtors‘ commission lawsuit settlement; buyer agent compensation for interested party contributions (IPCs) through Fannie Mae and Freddie Mac; Kamala Harris’ housing plan; and common financial issues that plague buyers and sellers in the market. Mills also offers insight into how local governments are combating low inventory and lagging home sales.
The trio kick off the conversation by diving into Mills’ background and experience. Mills graduated from the University of California at Berkeley with a degree in economics. After completing college, he worked for the Federal Reserve Board in Washington, D.C., in its research and economics division. Mills was assigned to govern the mortgage and consumer finance division, which is where he started his 40-year journey in the industry. Following that, his career path took him to the California MBA, private-sector companies like Countrywide Financial and more.
The first topic of discussion explores the difference between a concession and an interested party contribution, and whether that compensation is written into the offer or paid during the closing process. Mills confirms that IPCs are largely unaffected if the seller pays the buyer’s agent fees through the closing process. Robinson follows up by asking Mills if he would allow buyers to finance their agent fees. Mills explains that buyers would face higher loan costs, loan-to-value ratios and mortgage insurance premiums.
“You’re eroding their starting equity position, and that’s going to drive higher foreclosure and default costs through the system,” Mills says. “So, there are a lot of challenges in the space, and I think until we see a real compelling need to do something in that space, I’m not sure if that’s a good option.”
Mills notes that buyers still need representation, regardless of whether or not they can afford it, and the trio agree that the seller should pay the buyer’s agent commission. Still, they note that veterans, minorities and low-income buyers may suffer under the new system.
Robinson explains that sellers are technically still financing a commission if they choose to accept a financed down payment over a standard cash offer. Dwiggins also points out that the seller can save money by asking buyers to set their own commission rates, since buyers cannot exceed the compensation listed on their buyer representation agreement. Either way, the trio agree that commission financing should be uniquely tailored to individual sales.
Next, the conversation shifts to the recent Federal Reserve rate cut. Robinson asks how rate cuts will create more opportunities for buyers and sellers in terms of pent-up demand and lock-in effects. Mills forecasts two more rate cuts before the end of the year following the recent rate cut in September. Current homeowners will begin to move out of their low-rate mortgages, freeing up inventory for buyers in the market. Mills says that fixing the inventory shortage requires more supply and that local governments are becoming more receptive to homebuilding in their communities.
The conversation ends with Mills sharing his opinion on Kamala Harris’ preliminary housing plan. He likes the plan’s focus on increasing supply and the $25,000 down payment assistance component for first-time buyers, with more assistance available to first-generation homebuyers. Mills believes that targeted supply — referring to specific home types like luxury homes or starter homes — does not matter, as long as more inventory hits the market and increases homeownership opportunities.
