Magazine article Mortgage Banking

Uncle Sam Joins the Family Business

Magazine article Mortgage Banking

Uncle Sam Joins the Family Business

Article excerpt

Admitting that her agency "does not have the resources" to pursue all needed actions in certain financial enforcement cases, Mary Schapiro, chairman of the Securities and Exchange Commission (SEC), told an audience at the Securities Industry and Financial Markets Association (SIFMA) Annual Meeting in New York last November, "We have lo make judgments about what cases we can bring."

Schapiro argued for more muscle in that regard, stating: "We need a strong cop on the beat when it comes to Wall Street; we need a regulator who has the tools and resources. We have a lot or tools and more with Dodd-Frank [Wall Street Reform and Consumer Protection Act] to come, but we don't have the resources."

Zeroing in on one particular area of her jurisdiction, the SEC chair said, 'The general success of money market funds long allowed them to be a sleepy, low-risk part of the financial world. But] they catapulted into the general consciousness in September 2008, in the midst of the financial crisis when the reserve primary bond 'broke the buck,' triggering a run on prime money market funds."

Schapiro, who was appointed to her position in January 2009, said new SEC money market reforms would serve as "a critical first step, and [though] many have said, 'You've done enough,' I believe additional steps must be taken to address the structural features that make money market funds vulnerable to a run. They are significantly intertwined in the U.S. economy and global marketplace."

As reverse-mortgage lenders continue to wrangle with tax and insurance (T&I) delinquencies among senior customers and a resulting new emphasis on financial assessments is pressed, the Department of Housing and Urban Development (HUD) is working to better define the problem, according to Colin Cushman, director portfolio analysis for HUD. He told attendees at the National Reverse Mort-gage Lenders Association's (NRMLA's) Annual Meeting & Expo in Boston last October, "a third of the T&I problem is tax only, a third insurance and a third both. In jumbo loans, it is primarily a tax-only problem" Cushman reported, "especially in New York state."

For perspective, he reported, some 8 percent of the total reverse-mortgage portfolio has T&I default problems and among those, 42 percent defaulting owed less than $2,000. Further statistics from Cushman: "46,000 current borrowers have [some form of] delinquency status, totaling $209 million."

The HUD official said the agency wants "to identify borrowers with a high probability of default" and noted that the government intends to "request the industry get loan-level data to (project] the [potential default] threshold of these borrowers." Among the policy options being considered, Cushman noted, "are two- or three-year property charge sei-asides."

At the Five Star MPact mortgage banking conference and expo in Dallas in December last year, Steve Clinton of Freddie Mac and Edward Seiler of Fannie Mae seemed lo be at odds when Seiler, Fannie's director of economic business analysis and decisions, said, "We're not going back to the good old days of loss mit," spending hours with [each] client "finding out everything we can about their financial situations. There are 18 million Fannie loans on the books and millions who need loss mit. We don't have time to spend hours on the phone with clients, or the money to put every body through mass credit counseling." But then Clinton, Freddie's senior vice president of single-family operations, said the Federal Housing Finance Agency's (FHFA's) new servicer alignment initiative was "a reminder to get back to old-fashioned loss mit, and cleaner processes and common approaches to get more done. …

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