Thursday, July 25, 2013

Kill (the) Bill

The Bride: You and I have unfinished business.

Bill: Baby, you ain't kidding.

Kill Bill, Vol. 2

For years housing finance reform was contentedly filibustered by white paper in the public square. On Tuesday, July 23rd, this long-running, polite discussion was rudely interrupted by a House committee chairman who presented his ideas for reform and then had the audacity to press them to a vote.

Chairman Hensarling, tired of the seemingly endless discussion, moved the Protecting American Taxpayers and Homeowners Act, or PATH Act, out of the Financial Services Committee. By taking this step, Hensarling advanced and focused the housing finance reform debate in ways we haven't seen in quite a while.

Everyone has an opinion on this. Mine is that a vote somewhere, on something, was way overdue.


If you’ve been to the breakfast discussions, policy conferences, committee hearings, or paid casual attention to the PATH Act mark up, you know that policymakers of all political stripes say housing finance reform is the unfinished business of the Dodd Frank Act. To be fair, there are many legitimate reasons why this issue was left on the Dodd Frank cutting room floor and there are any number of clichés that are apropos when it comes to illustrating why most were content to push the discussion to another day. 

Chairman Hensarling’s contribution to the housing finance reform debate is substantial in that he took ownership of an issue that other policymakers in leadership positions willingly allowed to languish. Chairman Hensarling moved members of Congress from just talking housing finance reform to actually voting on it. That’s no small feat and it is leadership.

Rep. Waters will not support the PATH Act and has lampooned it as the Path to Nowhere Act. Yet, Rep. Waters acknowledged the need to move forward. The majority of committee members seemed genuinely interested in a debate on housing finance reform legislation and in getting started on a long overdue process.

Many label the PATH Act a futile exercise in ideology and perhaps that’s what it ends up being. But no matter how Chairman Hensarling’s bill is viewed, it is serving an important purpose. This is why the PATH Act needs to take the next step in the legislative process and move to the House floor.

Speaking of taking the next step, the Corker-Warner bill needs to show it can keep pace. I’m sure the bill’s supporters are looking forward to their day in committee, but that day has yet to come. The PATH Act may not become law in its current form, but it has gotten out of committee. Corker-Warner needs to catch up.


I know there are many who want to use the five-point-palm-exploding-heart technique on the PATH Act. If they truly support housing finance reform and understand the process, they’ll know that trying to kill the bill at this stage sacrifices long-term goals for a short-term political win.

It is important that House Republicans have a discussion and vote on their ideas for housing finance reform. It is important for House Democrats to present, defend, and have a vote on their alternative. That is the legislative process and the House needs to be given opportunity to work its will. A similar process needs to play out in the Senate so we see the kind of legs Corker-Warner has.

I can only imagine the amount of money that will be spent, and overtime worked, during the August recess on this issue of housing finance reform. After all, I’ll be busy with it myself. That’s an important part of the legislative process, too. Members need to hear a variety of constituent views on the intersection of housing finance policy and daily life.

I just hope that when Congress returns in September, members and Senators are still willing to pursue a long-term solution to our housing finance policy problem.

Friday, June 21, 2013

Ready for what's next

Look, sir, you have to realize something. My father was a revolutionary in 1910. I was born in 1909. I was left alone with my mother, Doña Rosenda, may she rest in peace. I wanted to be a writer. After a while, I became disillusioned. I dedicated myself to what was coming, not what had gone before. That is your task, sir. To understand what it is that remains and not what has gone before. 
Don Rodrigo Pola to Abelardo Holguín, from Carlos Fuentes’ Adam in Eden

This is a tale of two hearings on one topic. Our first hearing was on May 21st and our second on June 18th. Our topic is the Qualified Mortgage rule.

I’ll come to my point quickly. The dynamic that gave us Dodd-Frank has changed. Not for everyone, of course, but definitely for some.

* * *

Finding a seat in 2128 Rayburn on May 21st for a subcommittee hearing on the CFPB’s QM rule was much easier than I expected. In my mind the hearing summary was mostly drafted. Republicans attack the CFPB and the QM rule while Democrats offer a spirited defense of the same. Details to be filled in with any back-and-forth between Rep. McHenry and the two CFPB witnesses.

My first indication I was slightly presumptuous was opening statements. Everyone seemed to have a problem with the QM rule and most were not being particularly polite. Questions were even more intriguing. Responses from the two CFPB witnesses baffling. For the first time, the CFPB was taking direct fire from both Republicans and Democrats.

I emailed a banking lobbyist to congratulate him on a job evidently well done. Even they were surprised by what was unfolding.

The besieged CFPB witnesses seemed unprepared for bipartisan criticism of their agency’s signature achievement. Rather than going on offense, the witnesses went into a defensive crouch frustrating even the friendliest of questioners by speaking in voices so low and soft that members couldn’t hear their long, winding answers to simple questions.

I turned to a friend and said “They must not speak in loud voices at the CFPB.” The response was, “Or prep their witnesses. Did you see how frustrated Capuano was?”

Yes I did. I saw how Rep. Capuano probably went farther in expressing concerns about the QM rule just so the CFPB witnesses would get his point, which roughly translated was, “Your performance today doesn’t inspire confidence.”

Now to the June 18th hearing that ended up more interesting than the first.

Prepared to hear bipartisan criticism of the QM rule this time, what was interesting was how members chose to talk at or around the rule, which drew important contrasts. Suffice it to say that Ranking Member Waters doesn’t have party discipline on QM just yet.

Witness testimony could be summarized as complimentary of the CFPB, Director Cordray, and the QM rule followed by a litany of reasons why each witness’ sector of the mortgage industry should be exempted from the QM rule. When witnesses weren’t pleading for their exemption, they offered helpful suggestions on how the rule must be changed and implementation delayed.

Members were listening and agreeing. Not on everything, but on enough.

The Center for Responsible Lending’s Michael Calhoun, the only witness to defend the QM rule, grew more exasperated as bipartisan softballs were lobbed to industry witnesses. When he could get a word in, Mr. Calhoun argued against the industry’s preferred solution, H.R. 1077, the Consumer Mortgage Choice Act, saying the legislation would harm borrowers and allow mortgage fees to double. He went on the offensive against the title insurance industry, particularly lender-affiliated title companies. Mr. Calhoun spoke passionately about the need to ensure low points and fees.

For the most part, it seemed as if no one was listening to Mr. Calhoun. Except, as it turned out, for Rep. David Scott (D-GA), who said—

"Mr. Calhoun earlier made a statement that I totally disagree with and that is on his issue of the need for H.R. 1077. Let me assure you, Mr. Calhoun, we desperately need H.R. 1077."

Rep. Scott, a lead cosponsor of H.R. 1077, had no interest in hearing Mr. Calhoun respond, turning over the remainder of his time to the NAR and MBA witnesses to extol the virtues of his legislation. Mr. Calhoun must have doubled checked his calendar to make sure it wasn’t 2004 again.

Rep. Scott, along with a lot of his colleagues, is dedicating himself to what is to come, not what has gone before.   
 * * *
The members who passed the Dodd Frank Act don't want to go back to the Wild West of originate to distribute, but they like originate to hold in portfolio or originate to distribute with risk retention. Some may have a penchant for the occasional covered bond. You don't get much of these without originations.

This is the CFPB's challenge. Understand a shift has occurred. Understand that Americans are looking to a what's next that's pretty reasonable.