Return of the Federal Land Titling Study
Representative Marcy Kaptur (D-OH) has reintroduced her bill that would, among other things, require HUD to study the creation of a federal land titling system. H.R.2425 the Transparency and Security in Mortgage Registration Act of 2011 is word for word the same as the bill she dropped last November in the closing days of the 111th Congress. Kaptur is not on the Financial Services Committee, and is therefore not in a particularly strong position to push her proposal.
The bill would also effectively kill MERS by banning Fannie Mae, Freddie Mac and Ginnie Mae from owning, purchasing or guaranteeing mortgages where MERS is used to track their assignment or listed as the mortgagee of record.
Disappointingly, Rep. Kaptur and her staff have refused to meet with ALTA lobbyists to discuss the bill. As we evaluate our options for responding (or not), please stay tuned as we may seek your help in sending emails and phone calls to the Congresswoman to help get her attention.
Miller-McCarthy GSE Reform
A second bi-partisan GSE reform bill was introduced last week by Representatives Gary Miller (R-CA) and Carolyn McCarthy (D-NY). The bill would replace Fannie Mae and Freddie Mac, with a single facility responsible for issuing mortgage-backed securities guaranteed by the government. Unlike Fannie and Freddie, which before they entered conservatorship were accountable to private shareholders, the new model's profits would go directly to the U.S. Treasury. While opposed by some in Congress who wish to eliminate the GSEs altogether, we believe this "GSE as a utility" model may be where things end up. It would still provide a federal backstop as a means of ensuring a deep and liquid secondary mortgage market while eliminating the ability of the GSEs to repeat many of their past sins.
Of specific importance to the title industry the proposal would also require that, "the mortgage is covered by a policy for title insurance as the FHFA Board shall establish to ensure that title-related risks for the mortgage are borne by State-licensed title insurance companies." Inclusion of the title insurance language in this bill is further evidence that Members of Congress from both parties agree with the common sense idea that collateral underwriting standards need to be maintained in the future housing finance system. For more background on the three main GSE reform proposals, I commend this article from the Atlantic.
The Capital Markets Subcommittee will further pursue GSE reform this week when it marks up a series of seven very narrow bills written by subcommittee chair Scott Garrett (R-NJ). None of the bills present a ready opportunity to attach our title insurance language, though as you'll remember, Congressman Garrett did support the amendment of one of his earlier bills with our language.
Lastly, House Democrats Maurice Hinchey (D-NY), Michael Capuano (D-MA), John Conyers (D-MI), Peter DeFazio (D-OR), Jay Inslee (D-WA) and Lynn Woolsey (D-CA), all stalwart liberals, introduced a bill last week that would restore Glass-Steagall. Glass-Steagall was enacted after the Great Depression, and separated investment banks from commercial banks to prevent banks from using depositors' funds for risky trades. This is not a bipartisan measure and we do not expect the bill to gain traction in a Republican House.
ALTA Testifying Before House Financial Services Subcommittee
On Wednesday, ALTA President Anne Anastasi will testify before the Housing and Insurance Subcommittee on some of ALTA's on-going concerns about the Consumer Financial Protection Bureau's (CFPB) new draft combined mortgage disclosure. The hearing entitle, "Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses" will feature Teresa Payne from HUD and Sandra Braunstein from the Federal Reserve, giving their farewell addresses on RESPA and TILA. Those laws will transfer to the CFPB on July 21st.
ALTA's Government Affairs Committee will meet in advance of the hearing on Tuesday at 3:30 PM Eastern. The discussion will focus on our strategy for the hearing and the latest developments on other ALTA legislative priorities including Flood Insurance and GSE Reform.
The hearing will be streamed live on the committee's website.
Consumer Financial Protection Bureau
Friday afternoon, ALTA joined consumer groups, mortgage banking groups and the non-bank supervision staff of the CFPB to discuss how the Bureau will use its new power to supervise non-bank financial companies. Under Dodd-Frank, the CFPB has the authority to supervise the mortgage, payday lending and private student lending markets. For all other financial markets (expect the business of insurance) the CFPB generally can supervise nonbanks only if they are larger participants in these markets.
The Bureau is currently soliciting feedback on its proposal to limit its supervision to the debt collection, consumer reporting, consumer finance, money transmitting and check cashing, prepaid cards, and debt relief services markets. Further, they are also looking for assistance in how to define "a larger participant" in each of these markets. Comments on this proposal are due August 15th and Dodd-Frank requires the Bureau to propose a rule by July 21, 2012.
The House will continue consideration H.R. 1309 - Flood Insurance Reform Act of 2011 this week. Of concern is a proposal by Representative Candice Miller (R-NC) to eliminate the National Flood Insurance Program. ALTA signed onto these letters to House Republicans and Democrats asking them to oppose the Miller amendment.
I urge you to reach out to your member of Congress to voice concern about the devastating effect eliminating the NFIP would have on homeowners and taxpayers. Without affordable coverage, homeowners in flood prone areas would find their property worthless, while Congress would still predictably swoop in with ad hoc aid for distressed homeowners in the wake of each flood, ultimately costing tax payers more than the largely self-sustaining federal flood insurance program.
Fresh rumors made the rounds last week that mortgage servicers are close to reaching a settlement with federal and state officials on recent foreclosure controversies. According to sources close to the settlement talks, the amount of the settlement is generally pegged at $20-$25 million.
Republican members of the House Financial Services Committee continue to be outspoken in their opposition to the settlement proceedings, which they see as an end-around polices that the Congress has already rejected. Typical of this sentiment is Representative Randy Neugebauer (R-TX) who said that the "settlement proposal requires the resuscitation of policies and programs that have not worked or that Congress has explicitly rejected." Neugebauer is chairman of the Financial Services Oversight and Investigations Subcommittee and has also expressed concerns about CFPB's role in these negotiations.
While settlement talks are ongoing, it appears they are being buoyed by a worry that the CPFB will mandate new servicing requirements. At a Financial Institutions and Oversight joint subcommittee hearing, CFPB associate director Raj Date indicated mortgage servicing reforms will be one of the CFPB's first rulemakings. Though it is difficult to imagine exactly how the CFPB would pull it off, they appear to be considering restructuring markets to allow consumers an option to shop for their mortgage servicer. In his testimony, Date said, "The first of those structural features is simple: in the vast majority of cases, consumers do not choose their mortgage servicers. Mortgage servicing rights can be, and quite frequently are, bought and sold among servicers irrespective of the borrowers' consent. There are certainly legitimate and desirable aspects to the liquidity of mortgage servicing rights, but it has a practical disadvantage as well. Let me illustrate with an example. Last week, I had a prescription filled. If my pharmacist had made me stand in a long line, or if she was rude to me, or if she repeatedly lost my prescription paperwork, or if she was impossible to find on the phone, or if she gave me guidance that conflicted with my doctor's, or if she tried to give me the wrong medicine, then next time, I would simply go to a different pharmacist. That's how most consumer-facing markets work. But I get to choose my pharmacist. I don't typically get to choose my mortgage servicer." Of course, such a statement could also simply be intended to establish a moral mandate to further regulate the existing market.
Last week ALTA lobbyists met with Reps. Barney Frank (D-MA), Ed Royce (R-CA), David Schweikert (R-AZ) Gary Peters (D-MI), Jason Altmire (D-PA), John Barrow (D-GA), Jim Matheson (D-UT), Dan Boren (D-OK), Dennis Cardoza (D-CA), Jim Costa (D-CA), Mike McIntyre (D-NC), Health Shuler (D-NC), Kurt Schrader (D-OR), David Scott (D-GA), Jim Himes (D-CT) and Rick Berg (R-ND). Our lobbyists also met with staff from the offices of Sens. Johnny Isakson (R-GA), Mike Crapo (R-ID), Jerry Moran (R-KS), Ben Nelson (D-NE), Kay Hagen (D-NC), and Mary Landrieu (D-LA)
Housing Policy & Data
Rates for 30-year fixed-rate conventional mortgages jumped 9 basis points last week to 4.60%.
As mortgage rates jumped mortgage applications fell according the Mortgage Bankers. While purchase applications actually increased by 4.8%, those gains were more than offset by the drop in refinance volume. The increase in purchase applications reflected the recent increases in sales contracts.
One of the more troubling aspects of our deficient housing recovery has been that while a record share of Americans want to buy homes, U.S. policies, often work at cross-purposes.
In what could be dry run for GSE reform, the federal government is preparing for first retreat from the mortgage market by reducing the size of loans eligible for government backing. Reducing conforming loan limits from $729,750 to $625,500 will force many borrowers in more expensive markets to turn to the jumbo market for a mortgage. While lenders are gearing up for the move and believe they can fully service this market, absent a liquid market for private mortgage backed securities, borrowers should expect higher interest rates and larger down-payment requirements.
If you'll be in Park City, Utah this weekend and are looking for a challenging and provocative conversation about the latest market trends and running a title agency then join over 20 ALTA members for the Title Agents Executive Conference July 16 - 18. This meeting is one of the better opportunities we offer to discuss how to position your company over the next year. See our web site for information and registration and check here for a current list of attendees.
The State Legislative and Regulatory Action Committee will meet by conference call on Tuesday at 4 PM Eastern. This call is a great place to learn about the latest emerging trends in state regulation of the industry. If you would like to join the call please email ALTA's Manager of State Government Affairs Nick Hacker at firstname.lastname@example.org.
TIPAC rounded out the month of June with $196,540 from 290 contributors. Our goal this year is $300,000. If you have any questions about TIPAC, please contact Kelley Williams at email@example.com.
Lastly, for those not in Washington, one of America's newly minted hottest cities, the Washington Post reported this week that new foreclosure mediation rules are set to freeze over the REO market, because new buyers may not be able to get title insurance. The article is quite good from an industry perspective because it illustrates the value of title insurance and is a cautionary tale about danger of unintended consequences from well intended laws. As always here at ALTA, it was the product of a coordinated and focused team effort which prepared for and spent nearly an hour with the reporter explaining the title industry's function and value and warning that these laws "are incredibly destructive economically. They're really creating a dead zone in the housing market." However, my favorite quote of the article is from associate Director of Banking Christopher Weaver saying that having the city certify that the mediation law was followed would put "too much risk for the District of Columbia."