A deeply divided House Financial Services Committee took on FHA solvency this week as critics and defenders clashed over the agency’s practices, financial health and future role in the nation’s housing market. The distinctly partisan tone of the hearing quickly raised doubt as to whether the Republican majority and their Democratic opponents can come to some compromise to strengthen the FHA and reduce its risk to taxpayers. Committee Chairman Jeb Hensarling, R-TX, echoed complaints by Republican colleagues that the FHA is ...

Responding to industry concerns over the impact of the new loan officer compensation final rule on reverse mortgages, the Consumer Financial Protection Bureau has clarified the phrase “amount of credit extended” for closed-end Home Equity Conversion Mortgage loans. For closed-end reverse mortgages, a loan originator’s compensation may be based on either (a) the maximum proceeds available to the consumer under the loan; (b) the maximum claim amount (if the loan is subject to the Department of Housing and Urban Development’s HECM rules); or (c) the appraised value of the property, as determined by ...

Lawmakers on Capitol Hill this week mulled over how to strengthen the shaky financial condition of the FHA single-family insurance fund and reduce the risk to taxpayers of another government bailout, while shrinking the agency’s market footprint without disrupting the market’s fragile recovery. Partisan differences were immediately on display, predictably, as Republicans slammed the agency while Democrats defended it. “If the FHA was...

Republican critics of the Consumer Financial Protection Bureau are maneuvering to take advantage of a sudden opportunity to push for changes to the leadership structure and the finances of the bureau, after a surprise legal ruling breathed new life into their long-running struggle to clip the new agencyfs wings. Last month, the U.S. Court of Appeals for the D.C. Circuit ruled in Noel Canning v. National Labor Relations Board that three recess appointments President Obama made to the NLRB were unconstitutional because the Senate was technically not in recess at the time they were made. Industry lawyers believe...

HARP 3.0 Status Update: Democrats in both the Senate and the White House are warming up efforts to expand government-backed refinance programs in order to assist underwater homeowners whose mortgages are packaged into non-agency securities. Repurposed refi proposals from last year are poised to be re-introduced in the 113th Congress with the active and vocal support of the Treasury Department, which may enact its own initiative if lawmakers can’t or won’t pass a measure. “We must expand...

Wall Street’s ability to hide and disguise significant risk through the abuse of derivatives and other “novel financial products” would be greatly reduced under a proposed modernization of tax rules issued last week by the Republican head of a top House committee. The “discussion draft” released by House Ways and Means Committee Chairman Rep. Dave Camp, R-MI, would revamp, among other things, the tax treatment of bonds traded at a discount or premium on the secondary market, increase the accuracy of determining gains and losses on securities sales and prevent harvesting of tax losses on securities. “Updating these tax rules to reflect modern developments in financial products will make...

Secondary market investors interested in branching out beyond plain vanilla mortgage products are not going to have much to get excited about once the Consumer Financial Protection Bureau’s new ability-to-repay rule kicks in next year, top legal experts suggested this week. “Will lenders make rebuttable presumption qualified mortgages? Remember, [lenders] are free to make loans that generally satisfy the ATR standard. We don’t think those are going to be very common. We don’t think they are going to be saleable in the secondary market at this point in time from what we know today,” Donald Lampe, leader of the financial services regulatory and compliance practice with the Dykema law firm, told participants in a webinar hosted by Inside Mortgage Finance, an affiliated newsletter. As he sees it, the real issue boils down...

Municipalities determined to follow through with a proposal to use local government eminent domain powers to nullify existing mortgage contracts of underwater borrowers should expect a swift response from the government conservator of Fannie Mae and Freddie Mac, warns an industry insider. Last week, executives of San Bernardino County, CA, voted to reject a proposal to use eminent domain to seize mortgages with negative equity to affect a principal reduction for borrowers. The decision was reportedly based on expert warnings about the destabilizing effect on the housing market such a policy would have, as well as a conspicuous lack of public support.

A senior House Democrat has again filed legislation seeking a Congressional investigation of Fannie Mae’s and Freddie Mac’s past and present management and decision making authority.Filed by Rep. Marcy Kaptur, D-OH, in mid-January, H.R. 234, The Fannie Mae and Freddie Mac Investigative Commission Act, would empower a Congressional body to “investigate the policies and practices engaged in by officers and directors at Fannie Mae and Freddie Mac responsible for making the decisions that led to the enterprises' financial instability and the subsequent Federal conservatorship” of the two GSEs. The Fannie Mae and Freddie Mac Investigative Commission would be composed of eight lawmakers – appointed by House and Senate leaders from both political parties – to examine the practices, decisions and policies of the two GSEs that affect the financial stability of the mortgage firms.

A number of mortgage industry experts share the view that a dark cloud has been cast over President Obama’s recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau, after an appeals court ruled late last week that other recess appointments the president made at the same time were unconstitutional. “The significance of this decision cannot be overstated as it raises a host of questions about the potential impact of a judicial ruling that Mr. Cordray’s recess appointment was similarly invalid,” said Barbara Mishkin, of counsel with the law firm of Ballard Spahr. Edward Mills, a financial policy analyst at FBR Capital Markets, said...