Realtors Hear From Cordray and Others on Federal Involvement Post Crisis
Realtors meeting at the National Association of Realtors® Midyear Legislative Meetings and Trade Expo heard two presentations about the roles the federal government is playing in the industry. Richard Cordray, Director of the Consumer Finance Protection Bureau (CRPB) spoke with glibness normally reserved for the campaign trail, about current activities at his agency.
Separately, a 'regulator issues' forum heard from a panel of industry insiders that new regulations and future reforms to financial markets will have broad implications for housing, mortgage markets, and homeownership. Particularly interesting was the assertion that the government shouldn't bear the risk of being involved in the mortgage securitization market (which is now generating huge profits for--well--the government).
Jason Gold, senior fellow at Progressive Policy Institute moderated the panel moderator titled Will Federal Regulators Shape the Future of Mortgage Finance? He said that new and pending mortgage rules stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act and uncertainty surrounding reform of the government-sponsored enterprises Fannie Mae and Freddie Mac are among the top challenges facing the housing industry.
Panelists were Barbara Novick, vice chairman at Block Rock, Inc., Rob Couch, counsel at Bradley Arant Boult Cummings, and Adolfo Marzol, vice chairman at Essent Guaranty Inc
Novick shared her perspective on the many industry players, housing policies and initiatives that are currently impacting mortgage investors and housing finance markets saying more must be done to restore the health of the housing market and attract greater private capital into mortgage markets.
She presented several principles for housing finance reform, including the need for a clearly defined government role and treating all market participants fairly. The return of private capital into the housing finance system also requires reaffirming the rights of first lien holders, addressing eminent domain and other anti-investor proposals, protecting investor rights in servicer settlements, and providing investors with policy and regulatory clarity and certainty.
"There isn't enough private capital available to fund the housing market, so there needs to be a continued and clearly defined role for federal government participation; having no government presence in the market is not a very good idea," she said.
Couch agreed that the government's current level of involvement in housing finance, with government entities issuing more than 99 percent of all mortgage-backed securities as they did last year, is unsustainable. "Something has to change, that amount of risk is far too great for the federal government to continue to assume," he said.
Couch is a member of the Bipartisan Policy Center Housing Commission which recently released recommendations for a new housing finance system. He overviewed the commission's proposals for scaling back the government's role in the nation's housing finance system and attracting more private capital to the market, winding down Fannie Mae and Freddie Mac, and replacing them with a new self-supporting government entity that would provide a limited government guarantee for catastrophic risk. Couch said the commission's goal was to jump start more serious discussions over the future of the nation's mortgage market and he anticipates legislative action later this year.
Marzol agreed that designing an effective and efficient secondary mortgage market model is important, but so is the handling of the transition from the current system to any new frame work. He said a poorly functioning secondary mortgage market could impede the mortgage and real estate industry, inhibit growth in housing markets and prevent creditworthy consumers from realizing their dreams of homeownership.
Cordray, who told the audience that his agency was created in the aftermath of the financial crisis, but that they as Realtors had had the view from the front lines as the roots of the crisis were laid down and when it all began to blow up, 'you saw your business drop like a rock," he said. "As Realtors, you have ridden the waves of financial booms and busts before, but nothing like what we saw five years ago," when the collapse of the housing market destroyed jobs throughout the country and the American dream of homeownership was shaken to its foundations. The aftermath has left a tremendous mess for us all to clean up, he said.
Cordray said that Congress, through the Dodd-Frank Act, had given the Bureau a broad range of tools to address and fix problems in the financial marketplace.
He ran through what his agency has accomplished since they were created in 2011 including rules such as Ability to Repay rule his agency recently issued pursuant to Dodd-Frank. He also talked about the resources now available to consumers such as the Know Before You Owe initiative which makes clear the prices and terms on mortgages, credit cards, student loans, and other products and the "AskCFPB" tool, an interactive database of answers to frequent consumer questions and the Consumer Response team. He urged the Realtors to encourage their clients to use the available resources including filing complaints about mortgages, credit cards, and other loans with CFPB.
Cordray said one of CFPB's central tenets is that an educated consumer is a more capable and effective consumer. "We want consumers to have the knowledge and information they need to select the products and services that are best for themselves and their families." To that end CFPB is making a conscious push for more personal finance education all over the country. He called it a "scandal and a grave mistake, that we do so little in our schools to prepare young people to manage their affairs once they go out on their own."
He closed by asking the Realtors to please stay engaged with his office. "Share with us your perspective about the progress and problems you see in the marketplace. Help us educate your clients. We are united by our strong desire to put the American housing market on a sustainable path fueled by responsible lending. You deserve it, and American consumers deserve it."