The biggest issue facing the mortgage business this year is regulation. Nobody likes it. Most people would see some as inevitable. What would be too much?
The Consumer Financial Protection Bureau is the current boogeyman, replacing the Dodd-Frank Act that was last year's nightmare scenario (although you can't have CFPB without Dodd-Frank). It's rare that two opposing points of view can claim to be right but in this case, the CFPB does appear to be bringing the guns to bear on the mortgage business, especially the servicing side.
However, it is hard to recall a time where regulations by themselves caused a market rout (they may have contributed!) and it probably won't work out that way this time either.
It's useful to remember that this government and just about all administrations for the past 100 years have supported housing as a social policy objective. Their right to regulate comes first because finance is seen as important to the health of individuals and the nation. It comes second from the mechanisms the government has put into place to subsidize housing.
These include the mortgage interest deduction, mortgage insurance on FHA mortgages, the “discount” of 25 basis points or so in mortgage rates based on the workings of Fannie Me and Freddie Mac, deposit insurance for depositories, the mortgage insurance deduction and others.
Some in the industry might be willing to scrap many or all of those subsidies for reduced regulation. But it's doubtful this or any government would accede to that deal.
We presented a conference on mortgage regulation last year, and will follow that with a webinar on the same topic to be held this week, on Feb. 8. Our panelists include Michelle Leigh of SunTrust Bank, John Prendergast of the Conference of State Bank Supervisors and Jonathan Jaffe of legal firm KL Gates.
Topics to be discussed will include the state of the attorneys general negotiations with mortgage servicers, plus, will those terms become the de facto standard in the industry; an update on CFPB's focus and on its authority; CFPB's rulemaking and other substantive actions such as mortgage complaint desk, TIL/GFE disclosure forms early warning notice process; OCC guidelines addressing foreclosure and REO; CFPB's examination manual and procedures for mortgage servicing; understanding how regulation applies to default servicing in today's market; and QRM risk retention and QM rules.
