President Obama recently announced his latest plan to revive the housing market, outlining a proposal intended to help homeowners take advantage of historically low mortgage interest rates, even if they owe more than their homes are worth. In order to facilitate this proposal, the president has asked Congress for a tax on large banks to help “responsible homeowners” who are current on their payments refinance at today’s low rates. While some experts remain skeptical and the proposal faces an uphill battle in Congress, Obama said he is not waiting to take action, announcing, among other initiatives, a new Homeowner Bill of Rights and streamlined mortgage forms. The costs associated with the proposed refinancing program are between $5 billion and $10 billion and are supposed to be covered by a new tax on the nation’s largest banks, which would need to be approved by Congress.
Gene Sperling of the White House National Economic Council expressed his support for the president’s plan: “Well, let’s understand what the heart of the president’s proposal is. The heart of it is very simple. It’s saying that we should allow all responsible borrowers the chance to have streamlined refinancing, when we have historic low mortgage interest rates.” He explained that many folks are simply, “… falling through the cracks because they didn’t get a GSE-backed loan or, oddly enough, sometimes because they had too much equity in their home, which makes no sense.”
Ethan Handelman, vice president for policy and advocacy for the National Housing Conference, urged Congress to embrace the proposal in the spirit of bipartisanship. “President Obama’s announcement last week reinforces what we all know: We need coordinated action at many levels to restore housing markets, help struggling households and support a broader economic recovery. That action must, by necessity, be bipartisan and cooperative.”
While a handful have voiced their support, many politicians, as well as media and housing analysts, have attacked the president’s new plan, citing that his original Home Affordable Modification Program (HAMP) is a failure and that the new follow-up plan will do no better. The president’s latest proposal comes as the Republican presidential candidates vote in Nevada, which happens to be the state with the highest foreclosure rate in the country. “After promising to help millions, we continue to see the same proposals from President Obama and getting the same results: a deepening housing crisis,” Republican National Committee spokeswoman Kirsten Kukowski said in response to the president’s housing initiative.
According to CIS sources who participated in a recent bipartisan luncheon on Capitol Hill, the House GOP claimed that Obama’s housing plan is a no-go. Republican House Finance Committee staffers asked, “How many times do we have to have the government try to fix housing? We’ve had HARP, HAMP, and others and they’ve all failed.” They also questioned why we would give more risk to the FHA, which was said to be failing, just so a few borrowers current on their mortgage can save a couple hundred bucks a month. Our sources said this wasn’t an appropriate stimulus, especially on the back of the already beaten-up FHA. So, contrary to a positive statement recently released by Congressman Barney Frank, it appears that as of now, the president’s plan will not get far in the House.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.), who would be charged with steering the president’s proposal to the House floor, dismissed it as “not a serious plan to help the nation’s housing market.”
Despite this opposition, HUD Secretary Donovan said at the White House earlier last week that “the very institutions that made many of these mortgages that caused much of the damage that we’re trying to repair ought to participate in helping to solve it, and we think the bank fee is a good source to do that. If Congress believes that there are other ways that we should look at paying for this, I think we would be open to discussions – as the president has done in other situations, we are open to having a discussion with Congress about the best way to make sure the cost of this is covered.”
Donovan said the administration isn’t going to wait on lawmakers to move forward.
Furthermore, Donovan pointed out that most of the president’s proposals,
“Those are steps that we can take on our own,” he said. Meanwhile the CFPB is working on a one-page mortgage document designed to explain the costs associated with a home loan.
While lawmakers have generally expressed support for simplifying complex financial paperwork, newly appointed Director Richard Cordray will lead the charge, further agitating Republican lawmakers still upset over his recess appointment. Senate Majority Leader Harry Reid (D-Nev.) said Friday that legislation to improve the ailing housing market continues to be “high on the priority list,” although it is interesting to note that the chamber has yet to produce a bill.
In the wake of Cordray’s appointment, we can expect to see some significant changes now that the CFPB is functional. In recent conversations, a senior Republican House Financial Services Committee staffer indicated to CIS sources that the Republicans would likely shift their attention from Dodd-Frank reform to reforming the CFPB. We were told to expect bills that would bring CFPB under regular appropriations, would remove Cordray from the FDIC board and put him on the Fed board instead, and would ensure that privileged material from companies handed over to the CFPB stays that way. It was further noted that the last point is one that Cordray has previously requested in legislation, so the hope is that the “privileged material” clause will be quickly approved.
Furthermore, CIS sources were told that House Republicans are moving forward with three bills that would reconfigure the bureau. All of them face steep odds to enactment, with Democrats controlling the Senate and White House. One measure (HR 1355) would bring the CFPB under appropriators’ jurisdiction. As it stands now, the agency gets its money directly from the Federal Reserve (up to a certain percentage of the Fed’s operating expenses). In fiscal year 2013, the agency’s budget totaled $597 million (although it could ask for more). Republicans have consistently railed about the CFPB’s funding stream, arguing that it makes the agency unaccountable. But, of course, that’s exactly what the writers of Dodd-Frank intended – to keep the agency out of the congressional budgeting fray.
Expressing his support for CFPB reform, Chairman Bachus recently said, “No member of Congress opposes robust consumer protections, but many of us object to the structure of the CFPB. It was designed in a way to avoid transparency and oversight, and it gives unprecedented and wide-ranging powers to a single individual. The reforms we seek are common sense measures that will ensure the bureau fulfills its consumer protection mission while being accountable for its actions and use of resources.”
The second bill (HR 2081) would remove the CFPB director from the Federal Deposit Insurance Corporation’s board. Supporters of the bill say it would prevent potential conflicts of interest. The third bill (HR 3871) would clarify that privileged information shared with the CFPB by banks would not waive attorney-client privilege and open up the institutions to third-party subpoenas.
It was also stated during the bipartisan panel luncheon that those who thought GSE reform was a non-starter for some members of the House should note that it’s almost completely dead now. A senior House Financial Services staffer said that if the Senate and a number of House members don’t have a stomach for GSE reform, then it is silly to ask members to take tough votes on an issue that has no chance of passage, or even consideration, in the Senate.
On the other side of the aisle, House Democrats said they don’t have a specific agenda since they can’t control anything on the House side and that they will go with the flow as Republicans bring issues forward. The House Democrats hope to make sure that Dodd-Frank is implemented the way it was planned and that they will continue oversight in that area.
As for the Senate Democrats, they seem to be taking a slow approach to everything. Leadership in the Senate Banking Committee noted that if the right plan came along for GSEs, they could get behind it; otherwise, they don’t see any action or traction on this issue during a politically volatile year.
In summary, the most salient point here is to recognize how all of this illustrates the prevailing themes emerging inside Congress and the White House in 2012. The bottom line for the reverse mortgage industry is that while divided government continues to envelop the nation’s capital, it remains clear that when it comes to housing policy, the White House is intent on using its power to bypass Congress and openly plans to begin regulating the housing industry by leveraging each and every tool at its disposal. This isn’t to say that Congress does not continue to retain a great deal of power; the Democrat-controlled Senate can certainly assist the White House in many ways, and the Republican-controlled House of Representatives can absolutely control purse strings. The key to our industry will be to navigate each of these governing bodies by keeping them informed of our value as well as our needs and requirements to serve America’s seniors. We must continue to be fully engaged with both chambers of the Congress, the White House and the executive branch agencies directly impacting our industry.