WASHINGTON — Industry insiders and policymakers stepped out of the box Thursday at a forum on reviving mortgage lending, pitching a wide range of ideas from an independent Federal Housing Administration to a public market for mortgage-backed securities.
The daylong event hosted by the Federal Deposit Insurance Corp. focused on moving beyond the subprime lending crisis and ensuring that mortgage credit remains available to low- and moderate-income borrowers.
"Many people have tried to cut this Gordian knot. We still don't have a solution that works," said Ranieri & Co. chairman Lewis S. Ranieri, the famed mortgage bond pioneer.
FHA Commissioner Brian Montgomery, who expects to leave the job in about six months, argued his agency should be carved out of the Department of Housing and Urban Development so it can operate more independently.
As part of HUD, he said, the FHA has had trouble hiring and retaining qualified staff and updating its information technology systems.
"The FHA should be its own agency," Mr. Montgomery said. "We need to be able to recruit professional staff; we need to be able to retain professional staff, and pay them the way to keep them there."
The FHA's "average system is 18 years old," he said. "Does anyone in the private sector have a system that's 18 years old?"
In an interview later, Mr. Montgomery said an independent FHA could "focus solely on its own mission, … it needs to have the tools and personnel, and the independence, certainly with congressional oversight, to better serve that role."
Mr. Ranieri, participating in an early panel, said the private MBS industry has shown it is incapable of self-regulation. He called for tougher oversight, including clamping down on piggyback loans that he said are blocking many primary loans from being restructured.
"If we can't do it voluntarily, then we're going to have to do it involuntarily," Mr. Ranieri said. "Free will doesn't seem to work, so maybe we have to take some strong medicine."
Bankers aired other ideas for supporting credit to borrowers with spotty credit, while acknowledging past mistakes.
"I like to tell our people: we were to blame too. It wasn't mark-to-market [accounting]. … It wasn't the regulators," said JPMorgan Chase & Co. chief executive James Dimon.
Panelist Richard Carrion, the president and CEO of Popular Inc., touted the San Juan, Puerto Rico, company's use of alternative credit-scoring for subprime borrowers, opting for information such as payment history for apartment and utility bills, and tax returns to document income, when a credit score is unavailable.
"The underwriting process" for such alternative means "is very thorough — much more so than with traditional subprime lending," he said.
J. Michael Shepherd, the CEO of Bank of the West in San Francisco, said the $62 billion-asset bank, a unit of BNP Paribas SA's BancWest Corp. of Honolulu, has found success with programs that lower interest rates on more affordable loans to match loans subsidized under state bond plans, and focus lending on manufacturing housing, such as mobile homes.
"It certainly doesn't help build houses, but it provides housing" to lower-income borrowers, Mr. Shepherd said.
