Mnuchin on the Hill; FHA mortgage loan volume rises as risk grows

Receiving Wide Coverage ...

Mnuchin grilled: In addition to answering aggressive questions about his past investments and the foreclosure practices at banks he once owned, Treasury Secretary-designate Steven Mnuchin discussed his views on financial policy matters at his confirmation hearing before the Senate Finance Committee Thursday. He said he supports the Volcker rule but backs reviewing how it is enforced. He wants to preserve the Consumer Financial Protection Bureau but wants to change the way it's funded. He called for greater staffing levels at the Internal Revenue Service. He supports a strong dollar. And he defended the role of Fannie Mae and Freddie Mac in the mortgage market, saying he supported a "bipartisan fix" for the two agencies.

Mnuchin also said he backs simplifying the current crazy quilt of financial regulation, which he said is "killing community banking." Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

Big payday: It's good to be JPMorgan Chase CEO James Dimon. The bank said in regulatory filings that Dimon's compensation for 2016 will total $28 million, up 3.7%, or $1 million, from a year earlier. His pay package includes $21.5 million in performance-related restricted stock and a $5 million cash bonus. His base salary was unchanged at $1.5 million. Wall Street Journal, Financial Times

Wall Street Journal

Risky business: Bonds backed by the Federal Housing Administration topped $1 trillion for the first time in November, the paper reported. While that might ordinarily be something to celebrate, the Journal notes, "FHA loans have also been the worst performers among all major mortgages for years."

At the same time, commercial banks have largely abandoned the business, as their share of the originations market has dropped below 10% from more than 60% six years ago, while nonbank lenders' share has jumped to 80% from less than 10%. "This is the biggest shift in mortgage lending since the savings-and-loans debacle in the 1980s," said Ted Tozer, the outgoing head of Ginnie Mae, the agency that guarantees the bonds backed by FHA loans.

Meanwhile, one of the first regulatory rollback actions the incoming Trump administration is likely to take is to delay recently announced cuts to the FHA's annual mortgage insurance premiums, possibly as early as next week.

Why can't we be friends?: Bank-bashing Sen. Elizabeth Warren, D-Mass., is now asking banks for help. On Thursday she sent a letter to dozens of major financial institutions asking them to publicly embrace the fiduciary rule on retirement investments. Several of the banks are already complying with the rule, which doesn't take effect until April, but Republicans in Congress want to delay or kill the rule.

Changes: Deutsche Bank said it won't pay individual bonuses to employees at the vice president level or above this year, although they will still get bonuses tied to group performance. About 20% of DB bankers "most likely to be poached by rivals" will get some kind of retention payment.

Fannie fanned: A federal judge in Florida ruled that Fannie Mae can't sue the firm's auditor for alleged misconduct. Any claims against the auditor, Deloitte & Touche, were transferred to the Federal Housing Finance Agency when Fannie was placed into conservatorship in 2008, the judge ruled. The FHFA had asked the court to substitute it as the plaintiff in the case. In effect, that means Fannie and Freddie shareholders can't sue Deloitte, the Journal said, and the government is now likely to drop the case.

Quotable ...

"I would make sure that we did what we could to have proper regulation but eliminate overlap, as well as make sure the banks are lending to small- and medium-sized businesses, so we don't end up with a world where we only have four large banks." — Treasury secretary-designate Steven Mnuchin