FOR IMMEDIATE RELEASE
Elise Brooks, (202) 589-2427

Housing Policy Council Statement on Administration’s Proposal for Regulatory Reform

Washington, D.C.—June 18, 2009—   The Regulatory Reform Proposal introduced yesterday by the Administration includes some proposals that can help continue to strengthen mortgage lending in the U.S., but also contains some features that need careful review and revision by Congress.  A number of reforms and changes to protect consumers while strengthening lending are already underway, such as the implementation of new mortgage lending standards by the Federal Reserve under its HOEPA authority. The HPC supports reforms to strengthen underwriting standards, improve the loan securitization process, and to provide additional consumer protections, particularly improved and easier to understand disclosures on mortgage products and terms.     

“The Housing Policy Council supports the concept of a mortgage originator retaining some share of the risk on loans originated and securitized,” said John Dalton, President of HPC. “However, it must be done in a manner that enables the regulators to set appropriate standards of risk retention and not take a one-size fits all approach.” Dalton continued, “It appears that the Administration's proposal shares the approach contained in H.R. 1728 to provide the regulators with flexibility to apply risk retention standards. This flexibility is necessary to ensure that the goal of requiring originators to retain some of the risk of loans does not negatively impact the availability of mortgage credit to credit-worthy borrowers.” 

On the issue of compensation for mortgage brokers and other originators, HPC supports compensation being tied to the long-term sustainable performance of a mortgage loan, further reducing the chance for high-risk behavior. However, the role of mortgage brokers must be distinguished from that of company employees. 

The HPC supports additional efforts to strengthen protection of consumers in mortgage lending, but believes that these protections must be tied to safety and soundness and prudential regulations. The Administration’s proposal to transfer virtually all standards for mortgage lending to a new authority would complicate mortgage lending regulation, without clearly providing a benefit to consumers. The HPC further believes that improved standards can be achieved through appropriate standards set by banking regulators with improved coordination on consumer protection, and oppose a full transfer of authority to a new regulator.

The lack of preemption of state laws continues the problem associated with multiple jurisdictions regulating a national industry and would continue conflicting standards that can confuse consumers and increase costs.  Through uniform regulation, the chance for an unregulated entity creating serious problems is reduced and the market remains more stable.

The Administration’s white paper calls for a comprehensive review of GSEs; however, it does not provide a timetable or reform of these institutions. The HPC believes that comprehensive reform must occur in this sector and that a return to the conflicts created by the GSE's previous status should not be tolerated.

The HPC urges Congress to carefully consider the reforms already taking place in mortgage lending, to add to these reforms with care and to resist the temptation to create new agencies when better consumer protection and lending standards can be achieved through existing agencies working with improved authority and better coordination. The excessive layering of regulation will stifle innovation and creativity, qualities that have long been the hallmark of American business.  The Housing Policy Council wants to work with the Administration and Congress on effective consumer protections and safety and soundness reforms, but this process must be done carefully.

The Roundtable's Housing Policy Council is made up of twenty-six companies that are among the nation's leaders in mortgage finance.  Member companies originate sixty-five percent of the mortgages for American home buyers. Member companies participate in the Council through the senior mortgage executive in their company.

The Roundtable and the Housing Policy Council have partnered with other industry leaders to form HOPE NOW. HOPE NOW is an alliance between counselors, mortgage market participants, and mortgage servicers to create a unified, coordinated plan to reach and help as many homeowners as possible.

Roundtable member companies provide fuel for America's economic engine, accounting directly for $85.2 trillion in managed assets, $980 billion in revenue, and 2.3 million jobs.