Four more years: What the Bush reelection means for the mortgage industryPeggy KernBush administration, mortgage industry, economics, forecast
A month-plus after Election Day, Americans have settled back
into their red-and-blue seats for another four years of the Bush
Administration. On Capitol Hill, Republicans are riding high with
solid majorities in the Senate and House; Democrats are still
catching their breath and preparing for a tough legislative
climate.
With the race over and the furor finally dying down, the
mortgage industry is also evaluating what the next four years will
mean for their livelihood.
Economic uncertainty
The mortgage industry has enjoyed unprecedented growth over the
past several years. However, a recent report by the Urban Land
Institute and PricewaterhouseCoopers LLP found that real estate
investors are cautiously optimistic about the housing market in
2005. The report cites several factors that could impede economic
expansion, such as potential interest rate spikes, the weak dollar,
increasing trade deficits, uneven job growth prospects and
uncertainty surrounding the war in Iraq.
"The last four years have seen historically low interest rates
fueling unprecedented growth in new home starts, existing home
mortgage refinancing, and first-time home purchases," said Stevie
Kellogg, president of the National Association of Professional
Mortgage Women. "This has made a huge impact upon the mortgage and
lending business. Responding to this growth, lenders have generated
numerous new loan programs, creating a massive learning curve for
mortgage professionals at all levels. On the flip side, consumer
debt has grown to an all-time high and personal bankruptcies have
hit record levels. The same mortgage professionals are not only
helping their clients get into homes but, in some cases, keep their
homes in the face of financially difficult times."
"If the second Bush Administration continues its efforts to
strengthen small businesses, stabilize and fuel the economy, and
push for job growth, we expect to see another four years of
increased demand for knowledgeable and qualified mortgage
professionals at all levels," she continued.
"I hope President Bush pays attention to small businesses," says
National Association of Mortgage Brokers President Bob Armbruster,
noting that many brokers are also small business owners who are
particularly vulnerable to a tenuous economy and increasing
healthcare costs.
Changes to Fannie and Freddie
Fannie Mae and Freddie Mac can expect significant changes in the
near future, as Congress works to tighten regulations and
oversight. Both government-sponsored enterprises have faced tough
inquiries about their accounting practices. Most recently, Fannie
Mae was accused of pervasive accounting problems. Federal
regulators claim the company deferred $200 million in expenses in
1998, allowing top managers to obtain millions in bonuses.
"The administration is going to pursue reform of the Gases and
regulatory oversight with greater vigor," says Steve O'Connor, vice
president of government affairs for the Mortgage Bankers
Association. "Republicans having strength in their majority
improves the prospects of some sort of bill getting passed."
Armbruster concurs, saying Freddie and Fannie can expect "major
changes" in the coming months.
Resurrecting RESPA reform
Industry groups also expect another proposal from the U.S.
Department of Housing and Urban Development to reform the Real
Estate Settlement Procedures Act. Last year, HUD withdrew its
proposed rule after massive industry objections and a bipartisan
letter from Congress asking HUD to reconsider. Thanks in part to
this successful grassroots lobbying effort, both NAMB and the MBA
are confident that any future proposal will include significant
industry input.
"HUD Secretary Alphonso Jackson has indicated that he intends to
bring the RESPA reform proposal back after some consultation with
the industry," says O'Connor. "We expect that there will be
consultation and collaboration with HUD as they begin to pursue
this again."
Federal legislative initiatives
Also anticipated is the proposal of a uniform predatory lending
standard that would override state laws and harmonize the
regulatory environment.
"The uncertainty over the regulatory regime is not good for the
housing industry," says O'Connor. Many states have pursued their
own predatory lending legislation, which has resulted in
conflicting and sometimes over-restrictive regulationsmost notably
in North Carolina and Georgia. In some cases, Standard & Poor's
will no longer rate mortgage-backed securities that include loans
covered by certain laws. The result is a significant decrease in
available mortgages for consumers.
"The reelection of President Bush and increased Republican
margins in both the House and Senate significantly improve the odds
for passing tough but workable uniform federal standards for
non-prime mortgage lending that preempt the current patchwork of
conflicting state laws," said Wright Andrews, Washington counsel
for the National Home Equity Mortgage Association. "Had the
Kerry-Edwards ticket won, passage of such a federal law would have
been more difficult. In Congress, the Republican gains should make
it easier to negotiate reasonable statutory language on key issues.
However, Democratic members will remain important players in the
upcoming legislative debate, as well they should. 'Predatory
lending' is not, and should not be allowed to become, a partisan
issue."
House Financial Services Committee Chair Michael Oxley is
expected to pursue some form of predatory lending legislation early
next year, a bipartisan effort that is currently backed by ranking
Democrat, Rep. Barney Frank.
"A bipartisan majority of the full Financial Institutions
Committee now appears to recognize the need to pass a balanced
non-prime lending bill &" says Andrews. "And, quite
significantly, Reps. Bob Ney and Paul Kanjorskithe Committee's
second ranking Democratare now coming forth with a new bill that is
expected to have much broader bipartisan support than the original
Ney-Lucas proposal [in 2003]. The Ney-Kanjorski draft clearly will
be the basic marker from which the House will begin work in early
2005."
Sen. Richard C. Shelby will continue as Chair of the Senate
Banking Committee, with the possible addition of Republican Sen.
Mel Martinez, the former HUD Secretary who championed the original
RESPA rule. Sen. Shelby is known to head his Committee in a fairly
bipartisan manner and a bill similar to the new Ney-Kanjorski
proposal is expected early in 2005 from the Senate.
"Even if Republicans gain a larger Committee majority when the
new party Committee ratios are set for next year, Democratic
senators will still be key players," says Andrews. "Sen. Paul
Sarbanes, the ranking Democrat, has long championed adding new
legislative restrictions to HOEPA, and he cannot be expected to
support preemptive legislation unless it contains significant new
safeguards. A number of other committee Democrats are expected to
be more moderate in their views than Sen. Sarbanes on certain key
issues."
Beyond predatory lending, the industry would like to see other
legislative initiatives move forward as well.
"The Bush administration made an effort to pass an FHA zero down
payment bill, but it was bogged down [in Congress]," says O'Connor.
"We hope the administration will reinvigorate this legislation, as
it is aligned with Bush's homeownership goals."
Overall, the mortgage industry sees positive possibilities for
the next four years regarding legislative goals and improved
communication with lawmakers on the Hill. However, a shaky economy,
growing trade deficit, rising interest rates and uncertainty in the
Middle East are making many temper their optimism. Like all
Americans, the mortgage industry must wait and see what four more
years of the Bush presidency will mean in the long term.
