In the spirit of what he called "participatory regulation," the de facto head of the Consumer Financial Protection Bureau invited the Mortgage Bankers Association to suggest which areas of housing finance need his agency's immediate attention.
Raj Date, the special advisor to the Treasury Secretary at the 81-day-old bureau, made the offer at the MBA's annual convention in Chicago. But to hear the MBA leadership tell it, the business already is over-regulated. What it needs now, President David Stevens told the convention, is to be allowed to "take its own corrective action."
Stevens said mortgage bankers are the first to admit they made mistakes that helped cause the housing market implosion. But, he added, they also "know better than anyone else" about how to police the bad guys.
The MBA president said housing finance is "way more complicated" than lawmakers and regulators believe, and that it's not as simple as outlawing certain products or micromanaging underwriting guidelines.
He also said that it is wrong to think that mortgage originators that sell their loans in the secondary market don't already retain some risk. "Tell that to the hundreds of mortgage bankers spending millions to buy back defective loans or defend buyback demands on legitimate loans sold years ago," he said.
Stevens said that all markets go through cycles, and after each one, there is a correction. "You can't just outlaw that one bad product or that one market structure and expect there will never be another serious market crisis, because markets always find a way to correct," he said.
"We are the grown-ups in the room," he added. "We can't wait for policymakers to tell us how to act."
Another convention speaker, Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, seemed to agree, promising to "stay out of the way and let the private market take over with as little regulation as possible."
The Republican lawmaker also vowed "not to allow ideology" to block any attempt to get the housing market back on its feet, and said he would work with mortgage bankers to "come up with something that works for you."
For his part, Date pledged "smart regulation" that would be evidence-based, participatory and precise. The CFPB "doesn't plan to hide behind closed doors," he said.
