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The Consumer Financial Protection Bureau said Thursday it was seeking additional comments on the ability-to-repay rule, dashing expectations that a final rule would come by the end of June.
May 31 -
In the Federal Reserve Board's most recent survey of loan officers, bankers have a host of concerns keeping them away from originating loans held by Fannie Mae and Freddie Mac.
April 30 -
Plans to unify mortgage securities issued by Fannie Mae and Freddie Mac have been top of mind at several events this month, as the mortgage industry works to jumpstart the securities market in the wake of the financial crisis.
May 23
Washington just keeps kicking the can down the road.
Last week's announcement by the Consumer Financial Protection Bureau that it would to delay issuing final Qualified Mortgage rules for the mortgage industry and the Treasury Department's comments that housing reform requires further study are just the latest in a string of policy deferrals that prolong meaningful recovery in housing.
The premise for this statement is simple: too much regulatory uncertainty persists in the market for credit to flow more freely.
The Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices for April 2012, for example, suggests no real movement in banks' willingness to "open" the credit box much wider than it has been over the last couple of years, although lenders reported a pick-up in demand for residential mortgages overall.
While no single factor explains the industry's reticence to expand credit availability, regulatory uncertainty over mortgage origination, servicing and financing holds back the return of private capital to mortgage markets.
To their credit, the various agencies tasked with creating rules that will redefine the mortgage industry of the future have taken a deliberative approach, recognizing the complexity and significance of what such changes may usher in. However, these delays point toward a systemic policy malaise threatening to make the housing recovery since the crisis a decade-long process.
Since it defines what type of mortgage products will generally be available going forward, the QM rule has a lot riding on it. For example, the Qualified Residential Mortgage rule, a separate part of the reform introducing risk-retention provisions into the securitization process, is effectively on hold until the CFPB introduces the final QM regulations.
Beyond QM and QRM lie other major policy issues that have yet to be addressed which contribute to market uncertainty. Nearly four years after both enterprises went into conservatorship, a firm transition plan for Fannie Mae and Freddie Mac has yet to be announced or the details on what ultimately replaces these companies. The enterprises' regulator, the Federal Housing Finance Agency, has been proactive in positioning a strategic plan for handling legacy mortgage issues with the two firms, maintaining stability in securitization activities and working to develop the systems needed to support the future secondary market. However, politics on both sides have stymied efforts to provide any concrete action plan for moving beyond the caretaking activity that has effectively cast mortgage finance adrift in a sea of regulatory uncertainty.
One way to reduce this uncertainty, while strengthening the focus and resources on key strategic issues for FHFA, would be to merge the two enterprises and reorganize the businesses around three functional areas coinciding with the FHFA's
Clearly the issue is one of great complexity. However, too much time has elapsed now for there not to be a definitive game plan for reforming the secondary mortgage market.
Other areas of mortgage policy also remain unsettled. One of these is the role of the Federal Housing Administration in mortgage markets and the health of its Mutual Mortgage Insurance fund. Just last week, Lender Processing Services reported a
In addition, Basel III's revised capital requirements for mortgage servicing rights and the efforts to overhaul servicing compensation add to the confusion for industry participants assessing the strategic value of owning a mortgage business.
A unifying thread between each of these policy deferrals is the lack of a coherent national housing policy and implementation plan and clear ongoing communication of important aspects in the execution of such a plan. There is no single voice for the administration for housing. Given how much time has elapsed since the crisis, it will be difficult not to have history refer to this period as the lost decade in US housing markets.
To have any hope at avoiding this outcome, the administration should announce the establishment of a U.S. Housing Stability Commission comprised of members representing the relevant federal agency representatives chaired by one of these members with a primary mission of creating, coordinating and disseminating housing policy. Further delay in setting the roadmap for mortgage markets threatens healthy recovery from taking place.
Clifford Rossi is an executive-in-residence and Tyser Teaching Fellow at the University of Maryland's Robert H. Smith School of Business. He has held senior risk management and credit positions at Citigroup, Washington Mutual, Countrywide, Freddie Mac and Fannie Mae.
