Why the U.S. needs a housing czar
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
This past summer I had occasion to interview HUD Secretary Julian Castro. When I suggested that America needs a Housing Czar and how would he like to be America’s first, he quickly dismissed this idea, pointing out that the system is fine as it is.
Well, maybe not so much.
This week, the U.S. Court of Appeals for the District of Columbia vacated a $109 million penalty that the Consumer Financial Protection Bureau (CFPB) imposed against PHH Mortgage.
The court’s decision concluded: (1) CFPB violated a lenders’ right to due process; (2) the CFPB’s single directorship violates the separation of powers under the U.S. Constitution; (3) a three-year statute of limitations now applies, not the unlimited look-back period for any actions the CFPB brought against lenders.
Lenders have complained long and loudly about the CFPB’s regulation by enforcement (rather than clear and upfront policies). And it’s CFPB Director Richard Cordray’s world, we just live in it and pay the fines.
This means more borrowers are denied access to mortgage credit because lenders are underwriting borrowers more conservatively, not wanting to take chances.
A Housing Czar would replace the Secretary of Housing and Urban Development, empowered to govern housing policy and regulation in all respects.
This individual would be leader, mentor, and problem solver. Job one would be balancing the needs of all stakeholders with an emphasis on improving the housing lot for all Americans.
HUD’s enforcement activities were largely legislated to the CFPB under Dodd-Frank. There is still a Federal Housing Administration commissioner who can carry on HUD’s good deeds.
There is a pressing need to address Fannie and Freddie, still in conservatorship eight years later. What’s the end game and how do we execute? How do we raise mortgage money going forward to fund home loans? What do we do about the $2 trillion QE2 funds that the Fed still holds?
For consumers, the three most obvious fiascos that need to get undone are:
• A three-day timeout delay on closing purchases and a week’s delay on closing refinances. Costly havoc has been the result for borrowers, home sellers and lenders (not to mention moving companies). New rule should be one-day disclosure for both to review accuracy and then fund.
• Mortgage loan originator licensing for depository loan officers (those working for banks and credit unions), who currently are not licensed. Non-bank loan officers and mortgage brokers are.
It’s the same consumer, whether applying at a bank or non-bank, said Bob Niemi, senior advisor at law firm BakerHostetler LLP and a former nationally recognized Ohio mortgage regulator.
“We should all be playing by the same set of rules,” Niemi said. There are “people that work for banks (handling loans) that can never get a license.”
• Borrowers are at the beginning stages of longer waits as a result of appraiser attrition. Get rid of appraisal management companies. Bring back the freedom for local loan officers to hire local, reputable appraisers. Let the appraiser keep the entire fee.
Since the system was changed in 2009, appraisers are making about half of what they were and are responsible for much more appraisal detail. Work quality has suffered, and appraiser apathy is rampant.
Jeff Lazerson - Mortgage Columnist since 2011