An investigative report recently surfaced by New York Times author Gretchen Morgenson calling into question the revolving door between the private sector of the mortgage industry and Washington's top housing policy makers.
In the center of this criticism is the Mortgage Bankers Association, a lobbyist organization helmed by David Stevens, a former HUD Assistant Secretary and Federal Housing Administration Commissioner who now acts as the MBA’s President and CEO.
Now that the news has had a bit of time to marinate, some within the housing industry reacted by taking up alliances with lobbyist, while others went the opposite direction and questioned these higher-ups' motives.
“The industry fully appreciates and understands what [lobbyists] are attempting to do. What they do not understand is the means by which they are trying to do it.”
Josh Rosner, Managing Partner at Graham Fisher
"I find it amazing that after the crisis, big banks are able to remain powerful in today's market. Perhaps even more interesting is how they can recapture regulatory procedures and processes [in the event that the GSEs are no more]," Rosner continued.
Tim Pagliara, founder and chairman of Investors Unite, a coalition of more than 1,100 Fannie Mae and Freddie Mac investors, told DS News: “I’m not surprised. A lot of the movement to shut down the GSEs has been, on one level, irrational. There’s been a lot written about it. I think when you follow the money and the conflicts emerge, you see that it has less to do with policy than it does to do with the greed and arrogance of those that are trying to push their narrative.”
Alliant National Title Insurance Co., CEO Bob Grubb mentioned that "there is speculation about what the end-game is–I don’t know how it will shake out."
He noted that there are supporters of at least three possibilities: “reforming the current GSEs so they work better, creating entirely new entities that serve many of the current functions as the GSEs, and privatizing the market by eliminating the GSEs–phasing them out altogether.”
Marc Israel, MiT National Land Services President and Chief Counsel said in an interview that lobbyists lobby because it works, but a large part of how this will play out will be dependent on how the election goes.
"My first thought is that it should come as no big surprise to anyone that people in government are talking about fixing, or even eliminating, the GSEs which were so directly involved in the financial meltdown," Israel said. "Which leads to my second thought that when the major player in a $5.7 trillion market may be cut up, weakened or even killed, lots of players are going to want to scoop up the remains."
He added, "I think the MBA represents its constituent body and like any representative body it is made up of big and small players. I have no doubt that the MBA is trying to do their best for all of their members."
Jeff Bode, CEO and President of Mid America Mortgage said that “we need reform soon” whether it’s “through the two GSE’s or another entity, the government will need to have a role as a final backstop.”
“The big banks and the Institutional Investors that Fannie Mae and Freddie Mac are using to lay off the risk are going to fight reform tooth and nail. They are making a killing off of this arbitrage. It is just too complex to spell out to the general public for the necessary outrage to change things.”
Jeff Bode, CEO and President of Mid America Mortgage
Titan Lenders Corp., CSP and EVP Ruth Lee found it odd that neither Dodd-Frank nor the Consumer Financial Protection Bureau was brought into this discussion, as their role is to eliminate abuses or capital concerns.
“Dodd-Frank, in my opinion, codified 'too big to fail' by leaving smaller originators at a significant disadvantage to compete with the big banks on cost of funds, priority for HAMP, and the cost of regulatory and compliance burdens and the new technological (data) requirements of this new post-crisis landscape,” Lee noted. “Post melt-down–the five largest bank’s market share soared to 53 percent of mortgage originations, and have shrunk to a 'mere' 35 percent over the last few quarters. That’s a lot of origination share for 5 banks vs. the entire rest of the market. None of my comments negate the argument about Fannie and Freddie and I don’t know if there is some conspiracy to 'divide their prized assets.'”
“I believe those leading policy are influenced by their experience… and to be effective, they need to understand both sides of the issue–public and private. Often that requires time served in the trenches in both government and private sector work. This happens with many in public policy leadership, to include the CFPB.”
Ruth Lee, Titan Lenders Corp., CSP and EVP
“I bristle at the characterization of a revolving door… because it is value laden,” Lee stated. “We want policy leadership to have strong public and private experience. I have to say I personally believe there is an important role for a healthy, private securitization market… and a return to the efficiencies of a capitalist structure not always evidenced by a government-run enterprise. However, without considering the market today, managed under a strong regulatory framework, you cannot assume a return to the excesses of the past if Fannie and Freddie are returned to private investors.”
A spokesperson from Fannie Mae and Freddie Mac told DS News that they "do not comment on items related to GSE reform."
The MBA reacted angrily to the New York Times story, posting the following statement on its website:
“This story lacks substance and merit and thus is completely pointless. MBA advocates tirelessly on behalf of all of its members, both large and small, who represent the entire real-estate finance industry. At no point during David Stevens' tenure in the government and now as president and CEO of the Mortgage Bankers Association, did he ever violate any ethics statute. MBA will be putting out a more detailed response to specific points in this story later today.”