Finishing with a Flurry
Farrell, Mike, Mortgage Banking
Lawmakers crammed a huge amount of legislating into the final hours of the second session of the 105th Congress. The mortgage banking business took away some big victories. MBA's top lobbyist, Mike Ferrell, talks about the highlights.
IT WAS A LEGISLATIVE SESSION THAT BEGAN WITH ACRIMONYand ended with it. The lo5th Congress was marked, too, by being remarkably short, leaving little time for the many tedious baby steps that usually go into lawmaking. But there was nothing tedious about the final hours of this Congress-things were flying. Legislators were cramming into the final lo days or so enough action to fill a normal working session. - One commercial mortgage banker who closely monitored the combatants at work, conceded that the session was short and marked by partisan wrangling. Yet, even with all odds seemingly against it, he still gives the session an A-plus for results. - How could this be, given the magnitude of the distractions occupying these lawmakers? - Apparently, the skids were greased by the persistent toiling of industry lobbyists who fought hard, for example, to secure higher FHA loan limits in the face of pretty steep odds. The Clinton administration asked for higher loan limits in its budget and HUD Secretary Andrew Cuomo put his shoulder to the wheel in the fight. But the Banking Committee leadership, the entire mortgage insurance industry and power blockers Fannie Mae and Freddie Mac made no secret of their opposition to making FHA more competitive in higher-priced markets.
And yet higher loan limits for FHA prevailed, and even a simplification of the down payment formula for FHA single-family loans was included. With the bill now signed (it was packaged in the FY i999 appropriations bill for VA, HUD and other independent agencies), the down payment amount for FHA single-family home loans becomes a blissfully simple 3 percent of the sale price. That replaces the advanced calculus equation that existed before.
Although there was help in the fight from others in the housing industry, the Mortgage Bankers Association of America took a lead role in the FHA loan-limits fight. "We were the lead dog-no question," says Paul Reid, executive vice president, MBA.
But there were other issues before the second session of the 105th Congress, and not all went in the industry's favor. There was movement but no legislation passed on bankruptcy reform (while it included relief from a low cap on single-asset bankruptcies, it also included something called the "Durbin Predatory Lending Amendment" that sent home equity lenders scrambling). There were two unexpected 11thhour bids to raise the Ginnie Mae guaranty fee and an end run by Freddie Mac to revise its charter act to permit it to self-insure mortgages it buys from lenders. While some action was unanticipated, other action that was expected (or more like hoped for), never materialized.
Among the latter was the comprehensive reform of the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). On this score, while the banking committees could not move any consensus legislationprobably because no clear consensus yet exists between industry and consumer groups-one congressman has been pulling yeoman's duty seeking relief for the industry from related yield spread premium (YSP) class-action suits (see sidebar).
Against this backdrop we asked MBA's Ferrell to share his reflections on the session. Here is what he had to say. Q: What were the highlights of the session?
A: I would say that the 105th Congress had something of a split personality when it came to real estate. On the one hand, it approved the higher [FHA] loan limits. On the other hand it also aimed its fire at the Ginnie Mae [guaranty] fee and on expanding home inspection requirements for all FHA loans. So there was this real split personality or conflict within the Congress about whether to reward or punish both the borrowers and the lenders who take advantage of or participate in the FHA program. …