Mortgage finance reform is getting more attention on Capitol Hill after Congress gave itself a few more months of breathing room on budget and debt issues, but industry observers say there is increased chatter from champions of Fannie Mae and Freddie Mac who insist that killing them outright would do the mortgage market more harm than good. “There seems to be a bipartisan commitment to encourage private capital support for the U.S. housing market while winding down Fannie Mae and Freddie Mac, the government-sponsored enterprises that hold dominant positions in the mortgage market,” noted analysts from Standards & Poor’s in a report last week. In the Senate, Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, the chairman and ranking member of the Senate Banking, Housing and Urban Affairs Committee, continue...

FHA automation, delegated underwriting and lenders’ willingness to assume the liability risk for quality control allowed FHA lending to proceed with little disruption during the 16-day government shutdown that ended this week. Lenders said they expected no disruption in the origination or closing of FHA loans provided the shutdown did not drag on for an extended period. Individual FHA borrowers with loans in process that required specific actions by FHA staff experienced some delay. Lenders, like Wells Fargo, worked with those customers on a case-by-case basis to ...

The Department of Housing and Urban Development’s proposed “qualified mortgage” rule attaches certain conditions to QM treatment that may complicate matters for participating lenders, said attorneys with K&L Gates in Washington, DC. On Sept. 30, the Department of Housing and Urban Development published its own proposed QM rule for FHA loans. The CFPB rule takes effect on Jan. 14, 2014, and will apply to FHA loans until HUD issues a final rule. Under the CFPB rule, many FHA loans would not qualify for the rule’s safe harbor because the higher mortgage insurance premiums would make them “higher priced mortgage loans.” Thus, in order to ...

Two surviving spouses of deceased reverse mortgage borrowers won their case against the Department of Housing and Urban Development after a U.S. court found HUD in violation of federal law for failing to protect the spouses from foreclosure. The court’s decision marks a turning point for surviving spouses, such as Robert Bennett of Annapolis, MD, and Leila Joseph of Brooklyn, NY, and ensures that they will be protected against eviction and foreclosure, despite the loss of their husband or wife, said Jean Constantine-Davis, a senior attorney with the AARP Foundation Litigation. In March 2011, the AARP and the law firm of Mehri & Skalet of Washington, DC, filed ...

The so-called QM Plus alternative for defining qualified residential mortgages under the emerging risk-retention rule for asset securitizations threatens the intent of the Dodd-Frank Act to balance consumer protection and fair access to credit, a top industry official said last week. “We really think that the QM Plus provision goes way too far in tipping the balance” between consumer protection and access to credit, David Stevens, president and CEO of the Mortgage Bankers Association, said during a webinar last week sponsored by Inside Mortgage Finance. The revised risk-retention/QRM rule jointly released by a handful of federal agencies in August would align...

If the mortgage reform legislation drafted by Sens. Bob Corker, R-TN, and Mark Warner, D-VA, becomes law, the mortgage market would be reconstituted in such a way that the nation’s largest banks could dominate the MBS market, according to the Community Mortgage Lenders of America. The CMLA, which represents small- to mid-sized residential lenders, isn’t entirely enthralled with Fannie Mae and Freddie Mac either, but according to a recent letter sent to the Senate Banking, Housing and Urban Affairs Committee, it fears that “too big to fail” banks could prove an even greater danger. The correspondence notes...

As the partial government shutdown and debt-ceiling crisis completed its second week, the sense of relative urgency for housing finance reform that lawmakers from both parties expressed just a month ago at the five-year anniversary of Fannie Mae’s and Freddie Mac’s conservatorship had taken a back seat to larger, partisan hostilities, say industry observers.In September, Democrat and Republican leadership of the Senate Banking, Housing and Urban Affairs Committee set a goal of finishing committee-level consideration of GSE reform by the end of 2013.

The “public voice” of the Federal Home Loan Bank system is calling on policymakers to remember the 12 regional banks as proposals are considered to restructure the nation’s housing finance system. A recently issued one-page “position paper” by the Council of Federal Home Loan Banks lists a set of nine positions the 12 have collectively adopted to remind official Washington that the system has “operated prudently and served as a mechanism for economic stability” for more than 80 years.

Residential lenders realize that eventually the industry will face lower loan limits for Fannie Mae/Freddie Mac mortgages, but they now hope the day of reckoning won’t come until sometime in the second quarter of 2014. “[The Federal Housing Finance Agency] is still trying to figure out what to do,” said one industry lobbyist who spoke under condition his name not be published. “They never thought they’d face this much resistance.” Industry groups and members of Congress have been besieging the agency with challenges to its authority to lower the limits for the government-sponsored enterprises and pleas to defer any such changes. As reported in the Oct. 4 issue of Inside Mortgage Finance, 13 Senators – including two Republicans – recently wrote...

The Obama administration is working to reform the government-sponsored enterprises but has said little publicly about its efforts for political reasons, according to a former advisor for the administration. As for when Congress might pass GSE reform, predictions range from as soon as next year to sometime after Obama’s presidency, if at all. Speaking at the ABS East conference sponsored by Information Management Network this week in Miami, Jim Parrott, owner of Falling Creek Advisors and a senior advisor at the National Economic Council until earlier this year, said the Obama administration has largely avoided publicly pushing GSE reform since releasing a white paper on the issue in 2011 due to concerns about reactions from Republicans in Congress. “The administration has been quite involved...