How the next administration will deal with issues ranging from predatory lending to regulation of Fannie Mae and Freddie Mac may be up in the air, but Sen. Phil Gramm's mortgage agenda for the Senate Banking Committee is already taking shape.
On Sept. 7 a banking committee staff member briefed about 30 mortgage industry lobbyists on Sen. Gramm's plans for next year and beyond, according to several people who attended the meeting.
They said the Texas Republican, who will remain chairman of the committee barring an unforeseen change in control in the Senate, is committed to simplifying the mortgage process and enforcement of current laws as an alternative to the type of predatory-lending legislation championed by consumer groups. His efforts, they said, would include a review of truth-in-lending and mortgage settlement laws next year, with an eye toward introducing reform legislation in 2001 or 2002.
In the meantime, Sen. Gramm is moving forward with an effort to rein in the alternative secondary market program being developed by the Federal Home Loan Bank System.
Word that the senator would advocate enforcement of current laws on predatory lending, rather than new legislation, and that he plans to revive plans to simplify the mortgage process, were met with skepticism by consumer advocates.
"I'm disappointed but not surprised that Sen. Gramm would use concerns about abuses of consumers to promote a mortgage industry agenda," said Peter Skillern, executive director of the Community Reinvestment Association of North Carolina. "Whether his legislation passes or not, it effectively creates a counteroffensive to the consumer movement to protect borrowers in the subprime market."
Industry representatives were encouraged, however. The Mortgage Bankers Association is "very supportive of Sen. Gramm's effort and his support of comprehensive mortgage reform," said John Courson, president and chief executive officer of Folsom, Calif.-based Central Pacific Mortgage and vice president-elect of the association.
Gerald Baker, president of First Horizon Home Loan Corp., said the initiatives all "sound positive" but that he would reserve judgment until the senator releases more details. He also suggested that legislation may not be needed. Community organizations and the Fannie Mae Foundation have created an informed public, he said, and automated underwriting programs have already done much to simplify the mortgage process.
Mr. Courson, who has been chairman of the MBA's mortgage reform task force for the last three years, said that making the mortgage application process "more consumer-friendly" is the best way to combat predatory lending. He criticized legislative efforts at the federal and state level over the past two years that have focused on regulating the terms and conditions of high-cost mortgages, saying that they have not eliminated predatory lending.
In his current effort to limit the Federal Home Loan Bank System's mortgage finance program, Sen. Gramm is squaring off against industry leadership. He has drafted an amendment for the veterans-housing appropriations bill that would have capped the program at $15 billion of assets and forbidden the Federal Housing Finance Board from offering a similar program again.
In letters to Appropriations Committee members last week, industry representative said they "strongly oppose" a new cap. The letter was signed by eight industry trade groups, including America's Community Bankers, the American Bankers Association, the Independent Community Bankers of America, and the Council of Federal Home Loan Banks.
But a spokeswoman for Sen. Gramm said he hopes to introduce the amendment when the full Senate considers the veterans-housing bill before the end of the month. She said the Senate Banking chairman - who has been at odds recently with the Home Loan banks on other issues - feels they have entered territory where they do not belong, and wants to cap the program to give the Banking Committee time to study it.
John L. von Seggern, the council's president, said a ceiling would effectively finish the program. "If we put another cap on it - it's dead," he said. "We would be perceived as being a bad business partner because we can't commit to deliver something and the banks can't count on us."