Despite the fact that the federal government’s Making Home Affordable program is currently set to expire at the end of next year, one Obama administration official says that the mortgage servicing rules that were adopted as part of the Home Affordable Modification Program may be sticking around — permanently.
In a speech given Friday at the Consumer Federation of America's Annual Financial Services Conference, Antonio Weiss, counselor to the Secretary of the Treasury, said that the HAMP “set new market standards for how modifications and loss mitigation are done across the industry,” and said that the administration is exploring the continuation of the HAMP servicing rules.
“Recently, Treasury held several conversations with stakeholders to find common ground to continue the standardization and transparency that HAMP has brought to mortgage servicing,” Weiss said, according to his prepared remarks.
“Chief among these reforms are-loss mitigation solutions that are designed to make monthly payments manageable,” Weiss continued. “By cementing these changes in the servicing industry, HAMP’s legacy promises to help ease the lives of future troubled borrowers for years to come.”
Weiss said that the administration plans to “make sure that HAMP’s servicing practices live on as a lasting legacy” even after the program expires.
During his speech, Weiss touched on a number of housing-related topics, including reiterating the administration’s position that it is opposed to the recapitalization and release of Fannie Mae and Freddie Mac.
The chatter around recapitalizing Fannie and Freddie has grown louder lately, with major civil rights groups, community lenders and other industry insiders pushing to allow the government-sponsored enterprises to rebuild their capital reserves.
But the Obama administration has pushed back against those efforts, with Michael Stegman, senior policy advisor for housing for the White House, saying repeatedly that the administration is not in favor of returning Fannie and Freddie to their pre-bailout status.
In his speech Friday, Weiss reiterated the Obama administration’s views on Fannie and Freddie.
“As time passes, some who view comprehensive housing finance reform as simply too difficult have begun calling for a return to the past,” Weiss said. “They are asking FHFA and Treasury to allow for the recapitalization and release of Fannie and Freddie from conservatorship. This approach is simply a bad deal for taxpayers and homeowners alike.”
Weiss went on to reference an editorial posted on HousingWire recently by the Consumer Federation of America’s Barry Zigas, who argued that “recap and release” is not the right path to affordable mortgages.
“First, as Barry recently pointed out, recap and release would do nothing to increase access for creditworthy borrowers who remain shut out of the market or renters who are struggling to find affordable homes,” Weiss said.
“Second, some have suggested the federal government could stop supporting Fannie and Freddie in the near term by allowing the companies to retain their earnings,” Weiss said.
“A recent analysis from Moody’s and the Urban Institute made clear that it could take decades for Fannie and Freddie to build safe and sound levels of capital and that recap and release would ultimately drive up the cost of mortgages,” Weiss continued.
“Third, contrary to the claims of some private investors, taxpayers have not been fully ‘repaid’ for the extraordinary risk they took in the crisis,” Weiss said. “This ‘repayment’ argument conveniently ignores the ongoing support that underpins Fannie and Freddie’s operations.”
In Weiss’ opinion, the “bottom line” is that the government needs to seek “much more fundamental reform,” and “not settle for the misguided call to return to a deeply flawed system.”
In addition to potentially expanding the HAMP servicing rules and not supporting recap and release, Weiss provided a glimpse at some of the ways that the Obama administration may push for comprehensive housing finance reform.
Weiss laid out three questions that he feels are “important to consider” for the future of housing finance.
Those questions are:
1. Are there alternative structures that can limit risk to taxpayers while ensuring broad access to credit?
2. For example, could a mutual or cooperative approach play a role in a future system?
3. And, how best can we utilize the GSEs’ existing infrastructure and systems?
“In the months ahead, Treasury will elicit the thoughts and insights of many of you gathered here today as we refine our thinking,” Weiss said.
“Consumer advocates need to play a key role in shaping efforts around reform,” Weiss concluded. “We look forward to working with you to develop programs and policies that harness the energy and efficiency of the marketplace for the benefit of all consumers.”
