Q&A with Senator Kay Hagan
England, Robert Stowe, Mortgage Banking
Senator Kay Hagan talks about the bipartisan amendment she and two other senators got added to the Dodd-Frank Act to create a Qualified Residential Mortgage exception to the risk-retention rule.
Sen. Kay Hagan (D-North Carolina) a member of the Committee on Banking, Housing and Urban Affairs, was elected in 2008, defeating Republican incumbent Elizabeth Dole, who had served one term. Hagan was born in Shelby, North Carolina. Her father was a tire salesman who moved his family to Lakeland, Florida, where Hagan spent most of her childhood. During their time in Lakeland, her father was elected mayor of the city. Hagan's mother, born Jeanette Chiles, was the sister of Lawton Chiles, who was a U.S. senator before being elected governor of Florida. Hagan engaged in her earliest political activity as a child, when she placed bumper stickers on cars for her Uncle Lawton. Hagan graduated from Florida State University, Tallahassee, Florida, and earned her J.D. degree from Wake Forest University School of Law, WinstonSalem, North Carolina. She spent 10 years working as a banker for North Carolina National Bank (or NCNB, which became NationsBank in 1991). NationsBank, in 1998, acquired BankAmerica Corporation and the merged banks today are known as Charlotte, North Carolina-based Bank of America. Hagan was first elected to the North Carolina General Assembly in 1998 as state senator for the state's 32nd district in Guilford County, including most of Greensboro. When she campaigned, her Uncle Lawton walked the district with her. In the U.S. Senate, Hagan serves on the Banking committee and the Committee on Small Business and Entrepreneurship, which is headed by Sen. Mary Landrieu (D-Louisiana), who was a co-sponsor of Hagan's Qualified Residential Mortgage (QRM) amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The other co-sponsor of the QRM measure was Sen. Johnny Isakson (R-Georgia), who is also the former president of Northside Realty, an Atlanta-based firm that became the largest realty company in the state.
Sen. Hagan sponsored the QRM amendment because she was concerned that the proposed risk-retention language contained in Dodd-Frank would restrict origination volume and raise the interest rates on mortgages for well-qualified borrowers. The amendment passed the Senate by unanimous consent on May 12, 2010.
After regulators began to put together their proposed definition of the risk-retention rule for securitizations, Hagan and her two co-sponsors became concerned that the rule was not following the clear intent of the QRM amendment she sponsored. She worried that federal regulators were going to write a very narrow QRM definition by limiting the exemption to mortgages with a 20 percent down payment - and even higher for refinanced mortgages.
Hagan, Isakson and Landrieu first wrote to the regulators on Nov. 8, 2010, to express their concerns. Their letter stated:
"Applied across the board, risk retention could raise the cost of mortgage credit even on well-underwritten loans to highly qualified borrowers," the senators wrote to the heads of six regulatory agencies tasked with coming up with the implementing regulations for risk-retention.
"With our amendment, the deterrent value of risk retention is focused where it should be - on lax underwriting standards and risky product features rather than on all residential mortgages," the trio wrote.
"Prior to sponsoring the amendment, we were provided with analyses of loan-level data that demonstrated that loans that satisfy the elements set out in our amendment default less frequently and cure more often than riskier loans," the senators wrote.
The senators explained to the regulators, "for loans with lower down payments that have combined loanto-value [LTV] ratios greater than 80 percent, the protections provided by mortgage insurance result in lower losses for lenders and investors, and fewer foreclosures for borrowers than similar loans that lack insurance. …