January 13, 2012
“The trouble with our times is that the future is not what it used to be.” -- Paul Valéry, French poet and philosopher.
The turn of a new year always provides ample opportunity for reflection and prognostication on what the future may bring. The times we live in are undoubtedly eventful and challenging. But such difficulties are not unique to our times, our nation, or even our industry. Just as each generation grumbles that those that follow are not as driven or successful as their own, so the burdens we face sometimes seem more significant than those that came before. In this new year, let us learn from previous generations and the obstacles they faced to better overcome our own and make a brighter future.
CFPB Launches Nonbank Supervision Program Amid Controversy
Richard Cordray, the new director of the Consumer Financial Protection Bureau (CFPB), wasted no time getting to work last week after his recess appointment by President Obama. After just one week on the job Cordray had named Raj Date as deputy director, announced the launch of its nonbank supervision program, and released mortgage origination examination procedures.
With the launch of the CFPB’s nonbank supervision program, Cordray said the Bureau will immediately begin overseeing non-depository institutions, an authority that until now was limited to regulating only banks.
The Dodd-Frank Wall Street Reform and Consumer Protection Act limited the CFPB’s oversight authority to regulating only banks until a CFPB director was confirmed by the Senate. But due to disagreements on whether Cordray’s recess appointment is legitimate, several media reports suggest that the CFPB could face legal challenges ahead.
Points of contention focus on two areas: whether or not the Senate was actually in recess for Obama to make a recess appointment, and whether a recess appointment skirts the legislative text of the Dodd-Frank Act, which calls for a Senate-confirmed director in order for the bureau to exercise its full authority.
The American Banker reports that House Republicans have begun circulating a sign-on letter protesting Cordray’s appointment on the grounds that it violates the Constitution. In a blog post on Citigroup’s website, Candi Wolff, Citigroup’s executive vice president for global government affairs, wrote that the CFPB can expect legal challenges not only from Congress, but also individuals and community and labor groups.
Last week, after fielding questions regarding the legality of the Cordray appointment, White House Press Secretary Jay Carney told reporters, “I can only say that we feel very confident about the legal foundation upon which the President made this decision." Thursday the Justice Department further attested the validity of the Cordray appointment by issuing a legal opinion asserting that the President is allowed to make recess appointments despite pro-forma Senate sessions that took place. But the Department did acknowledge that a legal challenge to the appointment was likely and the outcome uncertain.
Federal Reserve Issues White Paper Outlining Measures to Boost Housing
The Federal Reserve Board sent a white paper to Congress last week that offers advice to lawmakers for reviving the housing market. The white paper, titled The U.S. Housing Market: Current Conditions and Policy Considerations, outlines three measures for lawmakers to consider in easing some of the pressures on the housing market.
The paper states that because there is a large inventory of real estate owned (REO) properties weighing down on house prices, Congress should consider ways to convert these homes into rental properties. “The data suggest that a government-facilitated REO-to-rental program has the potential to help the housing market and improve loss recoveries on REO portfolios,” the paper states.
The second proposed measure suggests removing some obstacles preventing creditworthy borrowers from accessing mortgage credit, and asserts that “Continued efforts are needed to find an appropriate balance between prudent lending and appropriate consumer protection, on the one hand, and not unduly restricting mortgage credit, on the other hand.” Finally, the paper calls on lawmakers to limit the number of homeowners who are pushed into foreclosure by finding foreclosure alternatives, such as a short sale or a deed-in-lieu-of-foreclosure.
After sending the white paper to the chairs and ranking members of the Senate Banking and the House Financial Services Committees, Federal Reserve Chairman Ben S. Bernanke and members of the Federal Reserve Board received criticism from members of Congress. Senator Orrin Hatch (R-Utah), the ranking member of the Finance Committee, and Senator Bob Corker (R-Tenn.), a member of the Banking Committee, both chided the Federal Reserve for over stepping its role by making policy recommendations on housing.
The Federal Reserve white paper is available here.
Around the States
KY: For the New Year, the Kentucky Department of Financial Institutions (DFI) is offering consumers 100 tips for being money smart in honor of the agency’s 100 years serving the state. “2012 marks the historic occasion of our centennial,” said Commissioner Charles Vice. “For 100 years we’ve been protecting Kentuckians’ financial interests, and we will continue to do so into the future.” DFI traces its origin to the Banking Act of 1912, which was approved during the 1912 General Assembly regular session. The agency that is today called DFI first became operative on July 1, 1912. Read more.
ME: CSBS announced that the Maine Department of Professional and Financial Regulation, Bureau of Financial Institutions (the Bureau), has received a certificate of accreditation, certifying that the Bureau maintains the standards and practices in state banking supervision set by the organization’s accreditation program. Read more.
MS: CSBS and the American Association of Residential Mortgage Regulators (AARMR) announced that the Mississippi Department of Banking and Consumer Finance (the Department), Mortgage Division, has received a certificate of accreditation for mortgage supervision. This accreditation certifies that the Department maintains the standards and practices in mortgage supervision set by the CSBS and AARMR Mortgage Accreditation Program. Read more. _________________________________________________________
Around the Agencies
FRB: The Federal Reserve Board announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $76.9 billion of their estimated 2011 net income to the U.S. Treasury. Under the Board's policy, the residual earnings of each Federal Reserve Bank, after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in, are distributed to the U.S. Treasury. Read more.
HUD and TREASURY: The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the December edition of the Obama Administration's Housing Scorecard. Data in the December Housing Scorecard show some subtle improvements in the market over the past year, but underscore fragility as the overall outlook remains mixed. "The Administration’s programs have set standards that have benefitted millions of families across the country and helped them avoid foreclosure," said Treasury Assistant Secretary for Financial Stability Tim Massad. “We remain committed to helping as many families as we can while the housing market continues to recover.” The full report is available online.
OCC: The Office of the Comptroller of the Currency (OCC) recently announced its 2012 schedule of workshops to be held around the country for directors of nationally chartered community banks and federal savings associations. There will be nine workshops. The first one takes place Jan. 23-25 in Orange, California. “OCC workshops help directors of national banks and federal savings associations better understand their responsibilities and the risks facing their institutions in today’s dynamic banking environment,” said acting Comptroller of the Currency John Walsh. Read more.
FANNIE MAE: Fannie Mae announced CEO Michael J. Williams will resign. Williams was appointed President and Chief Executive Officer in 2009, after the company was placed in federal conservatorship. He will continue as CEO and as a director until Fannie Mae’s board of directors names a successor, at which time he will leave the company. “On behalf of the board of directors, I want to extend our gratitude to Mike for his tireless dedication to Fannie Mae and especially his exemplary service as its leader through three extremely challenging years,” said Philip A. Laskawy, Chairman. “As a result of Mike’s leadership, Fannie Mae is a better company and our country benefits from a stronger housing finance system.” Read more.
FANNIE MAE: Americans' attitudes on a variety of issues are marginally better than one month ago, according to results from Fannie Mae’s December National Housing Survey. Despite overall low levels of optimism among Americans, consumer sentiment trended in a positive direction in the final months of 2011. “December attitudes have rebounded from the lows seen during the debt ceiling debate and economic deterioration of Europe this past summer,” said Doug Duncan, vice president and chief economist of Fannie Mae. “There is marked improvement in consumer sentiment regarding the direction of the economy, personal finances, and future home price expectations.” Read more.
FREDDIE MAC: Freddie Mac released the results of its Primary Mortgage Market Survey, showing average fixed mortgage rates starting the year at or near their all-time lows. The 30-year fixed averaged 3.91 percent; matching its all-time record low amid recent data showing signs of improvement in the housing market and manufacturing industry. This marks the fifth consecutive week the 30-year fixed has averaged below 4.00 percent. Read more.
FREDDIE MAC: Later this month Freddie Mac will launch a free database tool for investors and analysts interested in monitoring Multifamily K-Deal mortgage-backed securities performance and credit quality. The Multifamily Securities Investor Access tool is designed to increase transparency and save investors time by providing easy access to all post-securitization data from investor reporting packages for the securities underlying the related series of K Certificates. "Investors want transparency and easy access to investment information. This new tool should enable anyone to easily track and analyze data for all our K-Deals,” said David Brickman, senior vice president of Freddie Mac Multifamily. The tool will be available on Freddie Mac’s website on Jan. 17 to anyone who completes a registration process. Read more.
MBA: The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the weeks ending Dec. 23, 2011 and Dec. 30, 2011. Mortgage applications for the week ending Dec. 30, 2011 decreased 3.7 percent from the week ending Dec. 16, 2011 (two weeks prior), according to data from the MBA Weekly Mortgage Applications Survey. The results include adjustments to account for the Christmas and New Year’s Day holidays. The Refinance Index decreased 1.9 percent compared to the week ending Dec. 16, 2011. The seasonally adjusted Purchase Index decreased 9.7 percent compared with levels reported two weeks ago. Read more.
WHITE HOUSE: The White House announced that current Director of Intergovernmental Affairs Cecilia Muñoz will now serve as the Director of the Domestic Policy Council. Muñoz will coordinate the policy-making process and supervise the execution of domestic policy in the White House. The National Conference of State Legislatures issued a statement congratulating Muñoz on her appointment, and National Governors Association (NGA) Executive Director Dan Crippen said in an NGA issued statement that he looked forward to working with Muñoz in this new capacity. Read more.
January 17: The Federal Deposit Insurance Corporation (FDIC) Board of Directors will meet in open session to discuss a memorandum and resolution regarding stress testing requirements for certain banks. The event will be Webcast live. Read more.
January 18: A joint hearing will be held by two Financial Services subcommittees, the Financial Institutions and Consumer Credit Subcommittee and Capital Markets and Government Sponsored Enterprises Subcommittee, to evaluate the proposed Volcker Rule. Read more.
January 19: The President’s Advisory Council on Financial Capability will convene for a public meeting at the Department of Treasury. Read more.
January 24-25: Federal Open Market Committee meeting. Read more.
“The tough thing about being a regulator is either you're over-regulating according to one side and under regulating by the other side… We just have to walk the line that we feel is appropriate and ensure the safety and soundness of our financial institutions.”
– Robert Braswell, Commissioner of the Georgia Department of Banking and Finance during an interview with the American Banker published Jan. 9.
Catherine Woody, Editor
Rockhelle Johnson, Writer
Edward Smith, Contributing Editor